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BEFORE THE 



FEDERAL TRADE 
COMMISSION 



Conference with National Lumber 
Manufacturers Association 



Chicago, July 19-20, 1915 

It*..- *• 






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v* 



BEFORE THE 

FEDERAL TRADE COMMISSION 



Conference with National Lumber Manufacturers Association 
Chicago, July 19-20, 1915 



Published by the National Lumber Manufacturers 
Association, R. S. Kellogg, Secretary 
925 Lumber Exchange, Chicago III. 

PRICE $1.00 



i 









tf 



BEFORE THE 



FEDERAL TRADE COMMISSION 



CONFERENCE WITH NATIONAL LUMBER 
MANUFACTURERS ASSOCIATION 



Chicago, Illinois, Monday, July 19, 1915. 11:00 oock a. m 



.Commisiiers 



BEFORE : 

JOSEPH E. DAVIES, Chairman. 
EDWARD N. HURLEY, Vice Chairman. 
WILLIAM J. HARRIS. 
WILL H. PARRY. 
GEORGE RUBLEE. 



APPEARANCES 



R. H. DOWNMAN (New Orleans, Louisiana), Preijit National 
Lumber Manufacturers Association. 

CHARLES S. KEITH (Kansas City, Missouri), P$ 
ern Pine Association. 

C. I. MILLARD (Norfolk, Virginia), Representing 
Pine Association. 

E. A. SELFRIDGE, JR. (Willits, California), Rep: 
fornia Redwood Manufacturers. 

GEORGE E. WATSON (New Orleans, Louisian^ecretary, 
Southern Cypress Manufacturers' Association. 

1 



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ting Cali- 






S-ini 



The Chairman: We will now proceed, gentlemen. The Federal 
Trade Commission is holding its initial hearing in the West this morn- 
ing on matters connected with the industries of the country. A great 
many complaints have been filed, both by large and small organiza- 
tions, with the Commission. The Commission has thought it desirable 
to afford every convenience to the business public, and has, therefore, 
determined to hold conferences or hearings in different parts of the 
country during the next two weeks, with a view to the facilitating of 
business and with a view to the accommodation of large and small 
businesses, who would perhaps find it inconvenient to come to Wash- 
ington. 

The lumber associations of the country are desirous of presenting 
certain matters to the Commission, and as a matter of accommodation 
for the various associations interested, we have set aside this time for 
hearing them, in connection with the problems of the lumber industry. 

Next week we will hold hearings here in connection with foreign 
trade and in connection with certain other matters which are before 
us and which arise in conjunction with this vicinity. 

We will now proceed, and will be very glad to hear Mr. R. H. 
Downman, of New Orleans, Louisiana, President of the National Lum- 
ber Manufacturers Association. 

I might say to the gentlemen of the press that Mr. Greeley, the 
Assistant Forester of the Forest Service of the Department of Agri- 
culture, and Dr. E. E. Pratt, Director of Foreign and Domestic Com- 
merce of the Department of Commerce, are participating in these con- 
ferences with us. 



STATEMENT BY R. H. DOWNMAN, PRESIDENT, NATIONAL 
LUMBER MANUFACTURERS ASSOCIATION 

Mr. Downman: Gentlemen of the Commission, the photographer 
has thrown a little dust on the situation, but I expect we can over- 
come it. 

We are here today representing an industry which has an investment 
of practically two and one-quarter billion dollars in the way of raw mate- 
rial and development — an industry which is the third largest in the point 
of employment of all industries in the United States, engaging 695,000 
men, upon whom are dependent 3,475,000 people. The success of the em- 
ployer and the employee are absolutely interdependent. The condition of 
this business in the last eight years has been one of demoralization. Prac- 
tically little or no profit has been made during that period. At the pres- 
ent time an actual loss in the business is occurring not only of profits, but 
an unavoidable, but nevertheless shameful, waste of forest resources. In 
some instances it will be demonstrated that the assets being converted 
into lumber are being sold on a basis which yields the owner nothing. 
This situation is due, more than any other thing, to over-production and 
uncontrolled competitive conditions. 

The railroad industry, one of the largest consumers of lumber in the 
United States, has not been in the market normally since 1907, and we 
estimate that their consumption today does not exceed more than 50% 
of normal consumption. 

The export business, which consumes 10% of the production of lum- 
ber, has practically ceased on account of the war. In the summer of 
1914 building operations stopped by reason of financial conditions. 

All of these causes, coupled with uncontrolled output, contribute to 
produce the demoralizing conditions that have for a long period existed 
and still exist. Prices have gone to pieces, wage scales have been uni- 
versally reduced, and bankruptcy has overtaken a large number of indi- 
viduals engaged in the industry. 

To this statement there is appended a compilation of data taken 
from Dun's Review covering a period of five years. This data gives 
a vivid and tragic picture of the financial ruin that has overtaken 
a large number of the lumber manufacturing interests and the impend- 
ing threat to all such interests. (Exhibit I.) 

5 



6 FEDERAL TRADE COMMISSION HEARING 

"We present ourselves to this body at its own invitation. "We ear- 
nestly urge the Commission to make the fullest possible investigation of 
our trade conditions — and this for the reason that we feel that if this 
body becomes thoroughly conversant with the industrial and economic 
situation as today exists in the lumber manufacturing business, you 
will not only permit some plan for relief, but of your own initiative, 
urge such a course. 

It is not alone our own business interests that are being sacrificed 
on the altar of unlimited and uncontrolled production of timber products, 
but indeed the broader interest of the public itself is involved. The 
wicked and needless waste of a prime, natural necessity would be im- 
possible in any other civilized country in the world. With us waste 
results from fear of law, in Europe waste is made impossible by law. 

The suggestions to be made to this honorable body by these business 
men will in no way encroach on the Anti-Trust laws of our nation. It is 
not our purpose to urge a course of action that runs counter to the fine 
spirit of justice that illuminates the interpretation by our courts of these 
laws. The Rule of Reason is the very essence of the thought we seek to 
present. At the base of all laws is to be found the purpose of conserving 
public welfare. This is the ultimate view of our courts in analyzing the 
purpose of our Anti-Trust laws. We as business men, although wishing 
to benefit our own interests, seek by the suggestions to be made to this 
Commission to so order our affairs that self-interest will not obscure 
public welfare. 

I desire to call your attention to the testimony of an eminent econo- 
mist as to his belief in the relation of the lumber industry toward the 
general prosperity of this country. I quote from Brookmire's Fore- 
caster, issued in New York on July 12 of this year : 

' ' If it were not for the weakness in the lumber trade and the depres- 
sion in the cotton states, we could predict a period of general prosperity. ' ' 

I wish also to invite your attention to the situation of the present 
demoralized condition of this industry as seriously affecting the supply 
of our raw material. The price of lumber has gotten so low that a very 
large portion of the tree cannot be profitably manufactured. As a result 
of this condition thirty percent of the cut is permitted to stay in the 
woods to waste. Based on the production in the United States for 1909, 
practically fifteen billion feet of timber is wasted annually, which in a 
period of a trifle over three years, is one year's total consumption of 
lumber. Touching on this subject I desire to quote to you from the 
report of the National Conservation Commission in 1908, which said : 



R. H. DOWNMAN 7 

"That there is, in the economic sense, over-production of lumber is 
wholly true, because we manufacture more lumber than our forests can 
yield permanently. No economic reason fully explains the difference be- 
tween the price of lumber grown in Europe. Difference in the density of 
population explains it only in part. But neither that nor the relation of 
supply to demand is the chief cause. It lies in our failure to realize that 
if we are to grow timber continuously to meet our needs its value must be 
reckoned by the cost of growing it as well as by the cost of logging and 
manufacture. Stumpage prices in the United States average less than 
one-fifth of the price of lumber at the mill. The value of anything which 
is needed is at least what it will cost to grow it again." 

The Chairman: Just what was that statement, Mr. Downman, 
as to the price of stumpage? 

Mr. Downman: "Stumpage prices in the United States average 
less than one-fifth of the price of lumber at the mill." That is, the 
value of the stumpage. 

The Chairman: It costs five times the value of the stumpage to 
get it to the mill? 

Mr. Downman: The f. o. b. price, as I take it; that is, the f. o. b. 
price or value of the lumber, one-fifth of which goes to the value of 
the stumpage under the conditions that prevailed at that time when 
the Conservation Commission made this statement : 

"We pay generally less for lumber than it is worth," and this is a 
continuation of the quotation from the Conservation Commission — "with 
a slight present gain to ourselves individually, and by so doing we dis- 
courage the right use of the forest and greatly increase the cost of 
lumber to ourselves later on, and to those who come after us. We must 
recognize the actual value of timber now, or pay an excessive price 
for it in the future, and we have carried destruction so far that we 
shall probably have to do both." 

I wish to file with you figures taken from the Forest Service and 
Census reports of 1906, 1907, 1908, 1909, 1910, 1911 and 1912, of the 
prices which lumber has realized, F. O. B. mills during those years, 
and marked as Exhibit II. 

I also invite your attention to the 1909 Census report showing the 
number of saw mills engaged in the business, and their total production, 
and especially call attention to the fact that there are 48,112 mills 
actively and competitively engaged in the manufacture of lumber, Ex- 
hibit III. 

I submit herewith Exhibit IY, taken from the same Census report 
of 1909, indicating the number of plants engaged in the production of 
various species of lumber. 



8 FEDERAL TRADE COMMISSION HEARING 

EXHIBIT 1. 
The following is a statement of the failures in the lumber manu- 
facturing business, as reported by Dun's Review, for the last five years : 

Years Firms Liabilities . 

1910 427 $14,806,274 

1911 416 16,000,205 - 

1912 421 12,971,002 

1913 505 19,460,891 

1914 484 22,517,908 

EXHIBIT 2. 
AVEEAGE F. O. B. MILL VALUES PEE M. FT. 

Softwoods 

1906 1907 1908 1909 1910 1911 1912 

Douglas Fir 14.20 14.12 11.97 12.44 13.09 11.05 11.58 

Yellow Pine 15.02 14.02 12.66 12.69 13.29 13.87 14.36 

Hemlock 15.31 15.53 13.65 13.95 13.85 13.59 13.68 

Eedwood 16.64 17.70 15.66 14.80 15.52 13.99 14.13 

Western Pine 14.01 15.67 15.03 15.39 14.26 13.88 13.62 

Spruce * 17.33 17.26 16.25 16.91 16.62 16.14 17.02 

Sugar Pine 16.11 19.84 17.78 18.14 18.68 17.52 

Cypress 21.94 22.12 21.30 20.46 20.51 20.54 20.09 

"White Pine 18.32 19.41 18.17 18.16 18.93 18.54 19.13 

Hardwoods 

Gum ...... 13.46 14.10 13.08 13.20 12.26 12.11 12.60 

Beech 14.05 14.30 13.50 13.25 14.34 14.09 13.51 

Maple 15.53 16.84 16.30 15.77 16.16 15.49 15.56 

Chestnut 17.49 17.04 16.27 16.12 16.23 16.63 16.62 

Birch 17.24 17.37 16.42 16.95 17.37 16.61 17.43 

Elm 18.08 18.45 18.40 17.52 18.67 17.13 16.87 

Cottonwood 17.15 18.42 17.76 18.05 17.78 18.12 20.44 

Basswood 18.66 20.03 20.50 19.50 20.94 19.20 19.26 

Oak 21.76 21.23 21.23 20.50 18.76 19.14 19.63 

Ash 24.35 25.01 25.51 24.44 22.47 21.21 20.27 

Yellow Poplar 24.21 24.91 25.30 25.39 24.71 25.46 24.06 

EXHIBIT 3. 

LUMBEE CUT BY STATES, 1909. 

State No. Mills. Cut M. Ft. 

Washington 1,143 3,862,916 

Louisiana 658 3,553,918 

Mississippi 1,795 2,572,669 

North Carolina 3,307 2,177,715 

Arkansas 2,060 2,111,300 

Virginia 3,511 2,101,716 

Texas 719 2,099,130 

Wisconsin 1,241 2,025,038 

Oregon 696 1,898,995 

Michigan 1,323 1,889,724 

Alabama 2,188 1,691,001 

Minnesota 745 1,561,508 

West Virginia 1,524 1,472,942 

Pennsylvania 3,054 1,462,771 

Georgia 2,083 1,342,249 

Tennessee > 2,643 1,223,849 



R. H. DOWNMAN 9 

State No. Mills. Cut M. Ft. 

Florida 491 1,201,734 

California 305 1,143,507 

Maine 1,243 1,111,565 

South Carolina 1,048 897,660 

Kentucky 2,372 860,712 

New York 2,308 681,440 

Missouri 2,076 660,159 

New Hampshire 708 649,606 

Idaho 304 645,800 

Indiana 1,604 556,418 

Ohio 1,632 542,904 

Massachusetts 643 361,200 

Vermont 725 351,571 

Montana 180 308,582 

Others 3,783 1,491,462 



Total 48,112 44,509,761 

EXHIBIT 4. 

LUMBER CUT BY SPECIES, 1909. 

Kind. No. Mills Producing Total Cut M. Ft! 

Yellow Pine 17,359 16,277,185 

Douglas Fir 1,499 4,856,378 

Oak 28,459 4,414,457 

White Pine 9,355 3,900,034 

Hemlock 8,572 3,051,399 

Spruce 4,279 1,748,547 

Western Pine 1,347 1,499,985 

Maple 10,858 1,106,604 

Cypress 1,504 955,635 

Yellow Poplar 10,770 858,500 

Gum 4,743 706,945 

Chestnut 8,968 663,891 

Redwood 69 521,630 

Beech 7,701 511,244 

Birch 4,608 452,370 

Basswood 6,973 399,151 

Elm 8,028 • 347,456 

Cedar 1,320 346,008 

Hickory 7,796 333,929 

Ash 8,930 291,209 

Cottonwood . . . • 2,922 265,600 

Larch 230 264,022 

Tamarack 1,148 157,192 

Balsam Fir 1,415 108,702 

Sugar Pine 97 97,191 

Others 374,497 

Total 44,509,761 

With this brief, general statement I desire to introduce to the Com- 
mission, representatives of the various branches of the industry, and 
first I will call upon Mr. C. S. Keith, representing the Southern Yellow 
Pine industry. 



STATEMENT OF CHAS. S. KEITH, PRESIDENT SOUTHERN 

PINE ASSOCIATION 

GENTLEMEN OF THE FEDERAL TEADE COMMISSION : 

I have been requested by my associates in the Southern Pine As- 
sociation to present to you the situation which now exists in our in- 
dustry, the causes for same, and the necessities for relief. They have 
also requested me to suggest to you for your consideration a plan 
which we have hoped might meet with your favorable consideration 
and which we expect would enable us to stop the demoralization which 
now exists in our business. 

It is our intention to try and give you the situation in line with 
a communication which has already been called to your attention. 

History of the Yellow Pine Business 

For the past three years, and in fact, for that matter, since the 
year 1907 or for the past eight years (with the exception of the last 
half of the year 1912 and the first half of the year 1913), the situation 
in the lumber business has been very unsatisfactory, and the result 
today is that the lumber business is in a practically ruinous condition 
and has been ever since the beginning of the year 1914, which was 
greatly accentuated by the declaration of war. 

In July, of last year, conditions looked as though we had reached 
the point where we were coming back to normal conditions. The 
volume of consumption for that month was 111% of the month's out- 
put, which indicated that the consumption was on the road towards 
absorbing our accumulation of stocks and that the situation would 
shortly become normal, 

Immediate Results of the War 

The immediate results of the war, as far as our own personal busi- 
ness is concerned, and I believe that this was a general condition of 
the entire industry — was a 58% reduction in the volume of our busi- 
ness for the month of August as compared with July, and a 39% re- 
duction in September as compared with August, with this situation 
maintaining up to January 1st, of this year. 

10 



CHAS. S. KEITH 11 

The effect of this situation upon prices was obvious, and this upon 
a market that was already greatly depressed, resulting in the price of 
lumber reaching $11.70 at the mills for the month of December, 1914. 

The results of the business for the first six months of the year 
1915 have shown no improvement worthy of consideration. 

Present Conditions 

Against the price of $11.70, the amount realized for lumber in 
December, 1914, the cost for the manufacture of lumber in the year 
1914 was $14,495. Kindly note Exhibits Nos. 1, 2 and 3. 

I wish to invite your special attention to the practice of the aver- 
age lumber operation in the South providing at least a ten years' 
supply of raw material behind its operations. In some instances, the 
amount of raw material behind the operation exceeds that just men- 
tioned. 

On a ten years' basis of operation, it is necessary for the lumber 
manufacturer to liquidate 10% of his assets per annum, and in order 
for him to secure a 6% net return on his total capital invested, it is 
necessary for him to secure 27.2% on his cost of manufacture. 

I now invite your attention to Exhibit No. 4, showing the distribu- 
tion of the money received per thousand feet of lumber for each of 
the years of 1912, 1913 and 1914. This will disclose the fact of the 
actual percentage of profit on the cost of manufacture, and in the year 
1914 discloses the fact of the percentage of loss thereon, which eats 
into the asset of timber which has been charged to the production in 
the form of stumpage. 

I wish to call your special attention to the fact that the informa- 
tion which we are using in presenting our case has been furnished by 
companies who produce one-seventh of the entire production of yellow 
pine, and whose average annual shipments and production, as dis- 
closed by these figures, were 89,490,000 feet; that these companies' 
equipment for logging, manufacture and distribution of their product 
is of the latest and most efficient character; that their operations ex- 
tend over the states of Missouri, Oklahoma, Arkansas, Texas, Louisiana 
and Mississippi, and disclose at least an average physical condition 
as to logging, such as the yield per acre and general contour of the 
country; that these operations are exclusively in virgin pine timber 
and not in second growth or second cutting; that these companies 
are managed by men whose ability is recognized as being among the 



12 



FEDERAL TRADE COMMISSION HEARING 



EXHIBIT NO. 1 
REALIZATION— LUMBER 



Date 
1912 

Jan. . 
Feb. . 
March 
April . 
May . 
June . 
July . . 
Aug. . 
Sept. . 
Oct. .. 
Nov. . 
Dec. . 



Feet 
Shipments 

166,695,537 
162,372,590 
160,656,575 
177,769,472 
213,222,339 
177,298,862 
192,843,580 
194,445,638 
156,230,834 
174,775,105 
168,678,011 
163,767,184 



Eeceipts 

2,271,181.66 
2,283,046.62 
2,298,267.69 
2,548,319.89 
3,104,537.55 
2,723,245.21 
3,055,089.09 
3,101,040.33 
2,617,665.94 
3,051,629.79 
2,994,121.27 
2,927,619.95 



Average 
Per M 



$13.62 
14.06 
14.31 
14.33 
14.56 
15.36 
15.84 
15.95 
16.76 
17.46 
17.75 
17.88 



Cost 

2,413,318.01 
2,350,732.93 
2,325,889.57 
2,573,639.72 
3,086,905.11 
2,566,826.52 
2,791,873.65 
2,815,067.31 
2,261,816.22 
2,530,289.18 
2,442,019.02 
2,370,922.97 



Cost 
Per M 

$14.4774 
14.4774 
14.4774 
14.4774 
14.4774 
14.4774 
14.4774 
14.4774 
14.4774 
14.4774 
14.4774 
14.4774 



Profit 
Loss 

142,136.35 
67,686.31 
27,621.88 
25,319.83 

17,632.44 
156,418.69 
263,215.44 
285,973.02 
355,849.72 
521,340.61 
552,102.25 
556,696.98 



Total. .2,108,755,727 $32,975,764.99 $15.6376 $30,529,300.21 $14.4774 $2,446,464.78 



1913 



Jan. 


. 205,317,056 


* 3,660,913.98 


$17.83 


$ 3,102,073.86 


$15.1087 $ 


558,840.12 


Feb. . . 


. 177,741,106 


3,237,996.56 


18.21 


2,685,437.11 


15.1087 


552,559.45 


March 


. 198,600,393 


3,601,547.86 


18.13 


3,000,593.71 


15.1087 


600,954.15 


April . 


. 190,405,588 


3,450,675.66 


18.12 


2,876,780.94 


15.1087 


573,894.72 


May . . 


. 200,702,115 


3,603,799.28 


17.95 


3,032,348.12 


15.1087 


571,451.16 


June . 


. 164,233,659 


2,911,588.53 


17.72 


2,481,357.10 


15.1087 


430,231.43 


July . 


. 182,687,187 


3,029,692.51 


16.58 


2,760,165.95 


15.1087 


269,526.56 


Aug. . 


. 198,903,900 


3,151,957.80 


15.84 


3,005,179.35 


15.1087 


146,778.45 


Sept. . 


. 188,351,380 


2,913,411.17 


15.47 


2,845,744.50 


15.1087 


67,666.67 


Oct. .. 


. . 199,231,248 


2,991,872.15 


15.02 


3,010,125.49 


15.1087 


18,253.34 


Nov. . 


. 188,724,201 


2,752,946.25 


14.69 


2,851,377.32 


15.1087 


98,431.07 


Dec. . 


. 179,334,834 


2,570,142.55 


14.33 


2,709,516.15 


15.1087 


139,373.60 



Total.. 2,274,232,667 $37,876,544.30 $16.6546 $34,360,699.60 $15.1087 $3,515,844.70 



1914 
Jan. 
Feb. . 
March 
April . 
May . 
June . 
July . 
Aug. . 
Sept. 
Oct. .. 
Nov. . 
Dec. . 



205,181,491 
185,688,505 
194,971,414 
208,167,145 
216,191,839 
215,738,167 
229,853,628 
203,970,972 
186,083,943 
174,502,285 
164,166,336 
174,837,521 



2,833,959.23 
2,591,584.90 
2,810,506.48 
2,979,969.07 
3,028,792.86 
2,980,538.36 
3,168,090.09 
2,810,834.86 
2,570,251.08 
2,303,014.40 
1,955,080.59 
2,045,377.52 



$13.81 
13.96 
14.42 
14.32 
14.01 
13.82 
13.78 
13.78 
13.81 
13.20 
11.91 
11.70 



3 2,974,269.84 
2,691,703.50 
2,826,266.56 
3,017,549.37 
3,133,873.67 
3,127,297.22 
3,331,912.25 
2,956,722.39 
2,697,435.58 

22,529,550.15 
2,379,722.43 
2,534,409.16 



$14.4958 
14.4958 
14.4958 
14.4958 
14.4958 
14.4958 
14.4958 
14.4958 
14.4958 
14.4958 
14.4958 
14.4958 



140,310.61 
100,118.60 
15,760.08 
37,580.30 
105,080.81 
146,758.86 
163,822.16 
145,887.53 
127,184.50 
226,535.75 
424,641.84 
489,031.64 



Total. .2,359,353,246 $32,077,999.44 $13.5961 $34,200,712.12 $14.4958 $2,122,712.68 



Total for 

3 yrs... 6,742,341,640 $102,930,308.73 $15.27 



$99,090,711.93 



$3,839,596.80 



CHAS. S. KEITH 



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CHAS. S. KEITH 15 

EXHIBIT NO. 3 
SUMMARY OF 23 SAWMILL COMPANIES. 

(Used to Arrive at Total Cost of Production.) 
(Nine Are Imperfect as to Distribution of Cost.) 

Expense and Labor Cost, for Year 1912. 

03 

. U f-t 03 f-i o 

03 03 ^ 03 § £T ^ rL OS 

Departments S3 fn g >m ft pq £ £ ^j 

» S ^ CTm « s_, ri -^ m u 

&mS ca S £ © 1 © © o 

HH hH P-i W ^ O'-H H<H Cm 

Logging Accounts 1,557,171,342 $ 6,367,177.88 $4.0889 

1. Stumpage 

2. Logging 1,547,236,078 3,820,457.82 2.4692 $2,627,726.83 $1.6919 

Team Loading, Steam 

Loading, Hauling, Carts. . 
Hauling, Contract, 
Hauling, Skidding, Log 

Cutting, Spur Expense, - .. 
Log Freight, Log Un- 
loading 

General Logging 

Log Scale— Total 18.707% Overrun 

Eeduced, Board Measure 

Total 1,848,469,066 $10,187,635.70 $5.5114 $2,627,726.83 $1.4216 

Mill Accounts 1,848,469,066 $ 1,228,903.61 $ .6648 $1,615,134.28 $ .8738 

3. Saw Mill, Saw Mill 
Expense, Pond Expense. . 

4. Yarding — Green As- 
sorter, Stacking for 
Kilns, Dry Kilns, Cool- 
in » Shed, Dry Shed, 
Yard Dock, Assorting 
Table Yard Yard 

Stacking '. 1,758,962,884 805,606.40 .4580 1,300,549.66 .7394 

5. Planing Mill, Plan- 
ing Mill Expense 1,580,854,507 610,864.57 .3864 815,625.08 .5159 

6. Shipping, Shipping 
Expense, Yard Planer 

and Timber 1,418,763,498 303,263.43 .2137 459,468.75 .3238 

7. Depreciation 1,671,167,469 1,053,546.88 .6304 

8. Taxes 1,542,524,039 365,678.15 .2371 

9. Insurance — Fire, Lia- 
bility and Cyclone 1,645,044,832 244,970.76 .1489 3,316.65 .0020 

10. Office Expense, Mill 

Office 1,622,083,891 382,993.47 .2361 266,659.65 . .1644 

Total $ 8.4868 $ 4.0409 

11. Lumber Sales Ex- 
pense 1,715,092,075 978,656.90 .5706 64,419.55 .0376 

12. Interest and Ex- 
change 1,303,239.918 902,318.70 .6924 

13. General Expense 1,588,215,828 862,608.89 .5431 168,409.97 .1060 

Total $10.2929 $ 4.1845 

Number of Men Employed 
Total Days of Operation 
Average, 3 years, 14.6999 $14.4774 



16 FEDERAL TRADE COMMISSION HEARING 

EXHIBIT NO. 3— Continued 

SUMMARY OF 23 SAWMILL COMPANIES 

(Used to Arrive at Total Cost of Production.) 
(Nine Are Imperfect as to Distribution of Cost.) 

Expense and Labor Cost, for Year 1913 

?-t ;-, to ?h , o 

^ d V C$ ft ft <S Sr^ 

Departments ^J* g^n ft pq g{* _^j 

S^ft *^ E * la ^ o ^ 

r hH ^ r* O ° O ™0 r 9 O 

HRi-Hft h=-i«H O ^ I— 1 =H OtH 

Logging Accounts 1,809,389,254 $ 7,820,725.29 $4.3223 

1. Stumpage 

2. Logging 1,805,253,848 4,515,927.36 $3,267,165.84 

Team Loading, Steam 

Loading, Hauling, Carts . . 
Hauling, Contract, 
Hauling, Skidding, Log 
Cutting, Spur Expense, 
Log Freight, Log Un- 
loading 

General Logging 

Log Scale— Total 18.446% Overrun 

Eeduced, Board Measure 

Total 2,143,142,073 $12,336,652.65 $5.7563 $3,267,165.84 $1.5244 



Mill Accounts 2,143,142,073 $ 1,559,518.47 $ .7277 $2,022,595.84 $ .9437 

3. Saw Mill, Saw Mill 
Expense, Pond Expense. . 

4. Yarding — Green As- 
sorter, Stacking for 
Kilns, Dry Kilns, Cool- 
ing Shed, Dry Shed, 
Yard Dock, Assorting 
Table, Yard, Yard 

Stacking 2,042,691,466 869,519.66 .4257 1,499,525.11 .7341 

5. Planing Mill, Plan- 
ing Mill Expense 1,877,349,192 740,663.86 .3945 960,940.48 .5119 

6. Shipping, Shipping 
Expense, Yard Planer 

and Timber 1,658,603,539 328,754.50 .1982 587,306.04 .3541 

7. Depreciation 1,944,818,724 1,266,190.71 .6511 

8. Taxes 1,783,210,952 490,696.65 .2752 1,952.24 .0011 

9. Insurance — Fire, Lia- 
bility and Cyclone 1.883,115,261 360,639.37 .1915 3,475.90 .0018 

10. Office Expense, Mill 

Office 1,888,255,470 501,500.96 .2656 327,273.73 .1733 

Total $8.8858 $4.2444 

11. Lumber Sales Ex- 
pense 1,990,381,233 $1,149,382.47 $ .5775 $ 81,591.07 $ .0410 

12. Interest and Ex- 
change 1,568,182,750 1,118,744.36 .7134 

13. General Expense 1,804,745,275 953,984.80 .5286 213,024.13 .1180 

Total $10.7053 $4.4034 

Number of Men Employed 
Total Days of Operation 
Average, *3 years, 14.6999 $15.1087 



CHAS. S. KEITH 17 

EXHIBIT NO. 3— Continued 

SUMMARY OF 23 SAWMILL COMPANIES 

(Used to Arrive at Total Cost of Production.) 
(Nine Are Imperfect as to Distribution of Cost.) 

Expense and Labor Cost, for Year 1914 

Mm M. 

Departments R3 >h § >h & £j g >h ^^ 

® iS <D * O Og rig Oq 

Logging Accounts 1,856,624,277 $ 8,557,942.66 $1.6094 

1. Stumpage 

2. Logging 1,862,241,746 4,511,037.57 $3,280,759.09 

Team Loading, Steam 

Loading, Hauling, Carts . . 
Hauling, Contract, 
Hauling Skidding, Log 
Cutting, Spur Expense, 
Log Freight, Log Un- 
loading 

General Logging 

Log Scale— Total. ..... 22.505% Overrun 

Total . : 2,274,450,549 $13,068,980.23 $5.7460 $3,280,759.09 $1.4424 

Mill Accounts 2,274,450.549 $ 1,422,101.59 $ .6252 $1,977,970.34 $ .8696 

3. Saw Mill, Saw Mill 
Expense, Pond Expense. . 

4. Yarding — Green As- 
sorter, Stacking for 
Kilns, Dry Kilns, Cool- 
ing Shed, Dry Shed, 
Yard Dock, Assorting 
Table Yard Yard 

Stacking ......' 2,168,440,664 811,745.87 .3743 1,513,681.20 .6980 

5. Planing Mill, Plan- 
ing Mill Expense 1,983,706,414 698,341.84 .3520 976,035.09 .4920 

6. Shipping, Shipping 
Expense, Yard Planer 

and Timber 1,800,550,979 314,426.49 .1724 601,627.64 .3341 

7. Depreciation 2,045,809,284 1,279,824.48 .6256 

8. Taxes . T 1,925,708,226 612,971.56 .3183 1,183.95 .0006 

Q In siits yi o f* h^i tp T jtjj* 

bilitv and Cyclone . . 2,014,066,104 359,552.23 .1785 4,334.15 .0022 

10. Office Expense, Mill 

Office . . 2,015,217,454 504,100.77 .2501 336,436.31 .1669 

Total $8.6446 $4.0058 

11. Lumber Sales Ex- 
pense 2,115,445,330 $ 1,216,006.68 $ .5748 $ 81,985.16 $ .0387 

12. Interest and Ex- 
change 1,608,142,524 1,045,016.83 .6498 

13. General Expense 1,945,408,551 916,262.51 .4710 216,044.42 .1111 

Total $10.3402 $4.1556 

Number of Men Employed 
Total Days of Operation 
Average, 3 years, 14.6999 $14.4958 



18 FEDERAL TRADE COMMISSION HEARING 

EXHIBIT NO. 4 

DISTRIBUTION OF COST AND REALIZATION. 

Per 1,000 Feet Lumber. 

1912 

Stumpage (Log Scale) 1,557,171,342 $ 4,0889 

Overrun 18.707% 

Stumpage (Board Measure) 1,848,469,066 @$ 3.6034 $ 6,660,773.43 

Material and Supplies 3.2357 5,981,091.36 

Labor 5.7649 10,656,239.32 

General Expense (Includes 

Labor Selling) , 1.8734 3,462,921.95 

Cost $14.4774 $26,761,026.06 

Profit $ 1.1602 2,144,593.81 

Eealization $15.6376 $28,905,619.87 

DISTRIBUTION OF COST AND REALIZATION. 
Per 1,000 Feet Lumber. 

1913 

Stumpage (Log Scale) 1,809,389,354 - $ 4.3223 

Overrun 18.446% 

Stumpage (Board Measure) 2,143,142,073 @$ 3.8376 $ 8,224,522.02 

Material and Supplies 3.5203 7,544,503.04 

Labor 5.9211 12,689,758.53 

General Expense (Includes 

Labor Selling) 1.8297 3,921,307.05 

Cost $15.1087 $32,380,090.64 

Profit $ 1.5459 $ 3,313,083.33 

Eealization $16.6546. $35,693,173.97 

DISTRIBUTION OF COST AND REALIZATION. 

Per 1,000 Feet Lumber. 

1914 

Stumpage (Log Scale) 1,856,624,277 $ 4.6094 

Overrun 22.505% 

Stumpage "(Board Measure) 2,274,450,549 @$ 4.0052 $ 9,109,629.34 

Material and Supplies 3.3224 7,556,634.50 

Labor 5.4519 12,400,076.95 

General Expense (Includes 

Labor Selling) 1.7163 3,903,639.48 

Cost $14.4958 $32,969,980.27 

Loss .8997 $ 2,045,323.16 

Realization $13.5961 $30,924,657.11 



CHAS. S. KEITH 



19 



EXHIBIT NO. 5 



PER PLA1 


*T. STOCKS 


Under Pro- 
posed Plan. 

Feet. 


Actual Con- 
dition of 
Production. 
Feet. 


Under Proposed 
Plcn of Produc- 
tion ; In Not 
Producing More 
Than Public 
Demand. 
Feet. 


1,666,454 


3,757,140 


3,757,140 


1,692,333 


3,712,676 


3,712,676 


1,563,134 


3,605,132 


3,605,132 


1,439,843 


3,740,000 


3,739,800 


1,618,969 


4,029,084 


3,729,146 


760,955 


4,249,128 


3,388,153 



COMPILED FROM 283 MILLS FROM JULY, 1912, TO MAY, 1914, AND FROM 
255 MILLS FROM JUNE TO DECEMBER, 1914. 

(REDUCED TO ONE MILL BASIS.) 



Actual 

Condition. 

Feet. 

1912 

July 1,666,454 

August 1,692,233 

September 1,563.134 

October . . . .' 1,739,781 

November 1,618,969 

December 1,311,992 

1913 

January 1,626,777 

February 1,557,005 

March 1,741,337 

April 1,759,528 

May 1,893,831 

June 1,680,337 

July . . 1,678,662 

August 1,656,667 

September 1,608,795 

October 1,567,812 

November 1,562,532 

December 1,403,192 

1914 

January 1,680,532 

February 1,608,290 

March 1,779,282 

April 1,816,629 

May -.. 1,775,996 

June 1,867,626 

July 1,902,773 

August 1,782,004 

September 1,840,972 

October 1,710,245 

November 1,583,887 

December 



1,626,777 
1,557,005 
1,741,337 
1,759,528 
1,654,810 
1,680,337 
1,332,522 
1,656,667 
1,608,795 
1,419,956 
1,562,532 
1,403,192 



1,680,532 
1,608,290 
1,724,480 
1,816,629 
1,775,996 
1,867,626 
1,902,773 
1,782,004 
1,689,644 
1,710,245 
1,292,768 



4,404,646 
4,211,961 
4,214,183 
4,224,872 
4,335,869 
4,478,657 
4,651,840 
4,737,159 
4,704,706 
4,773,371 
4,723,710 
4,726,416 



4,850,473 
4,734,624 
4,759,343 
4,818,007 
4,832,971 
5,202,958 
5,163,334 
5,003,099 
5,037,099 
5,221,460 
5,221,460 
5,455,996 



3,553,661 
3,360,983 
3,363,208 
3,372,897 
3,245,873 
3,388,661 
3,215,704 
3,301,023 
3,268,570 
3,189,079 
3,139,418 
3,142,124 



3,266,181 
3,150,532 
3,120,249 
3,178,913 
3,193,877 
3,563,864 
3,524,240 
3,364,004 
3,246,677 
3,431,038 
3,139,919 
3,374,455 



20 FEDERAL TRADE COMMISSION HEARING 

best, not only in the yellow pine industry but in the entire industry 
of lumber. 

When we consider that the Census reports disclose a production 
of yellow pine in the year of 1909 of 16,277,185,000 feet, by 17,359 
sawmills, and that the average annual production per mill in 1909 
was only 931,000 feet, we must recognize that if these companies 
who have a large production and whose equipment for logging, manu- 
facture and distribution is of the latest and most efficient designs are 
really suffering, as their results of operation will indicate that they 
are from present conditions, how much worse must this situation be 
among those who are not so fortunately prepared to meet the situ- 
ation ? 

Consequently, the figures which we present must of necessity be 
recognized as being much better than the average condition of the 
entire industry. 

I wish, also, to direct your attention to the fact that yellow pine 
Lumber is the dominant factor in the lumber industry, producing as 
it does practically 40% of the entire production of lumber of the 
United States, and that the other branches of the industry must, by 
reason of the competition of yellow pine, necessarily suffer in the 
same proportion that yellow pine does. 

The figures which these companies have given us have been tabu- 
lated on their net sales of lumber, exclusive of freight, as per Exhibit 
No. 1, and their cost of operation, as per Exhibit No. 3. An analysis 
of these figures shows the following : 

During the three years of 1912, 1913 and 1914, the total ship- 
ments were 6,742,341,640 feet, this being an average, per annum, of 
2,237,270,820 feet. 

Assuming that the average life of all of these plants is at least 
ten years — which I think is well within the fact, as the life of some 
of these properties ranges from 15 to 40 years — it would represent 
a total amount of stumpage of 22,372,708,200 feet. 

The figures disclose that these mills charged their stumpage to 
their cost of operations during the past three years at an average 
charge of $4.35; that their depreciation (board measure) charge 
amounted to $0.6357 per thousand feet. These mills show that their 
overrun, or the amount of lumber scale in excess of log scale, was 
19.97% (or approximately 20%), and consequently their log scale 
charge for depreciation would have been $0.7638 per thousand, mak- 
ing their total charge for depreciation of plant, equipment and raw 



CHAS. S. KEITH 21 

material account $5.11 per thousand. This, based on the amount of 
stumpage on a ten years' basis, as aforesaid, amounts to an invest- 
ment of $114,324,538.90, exclusive of stocks of lumber, merchandise, 
logs and accounts receivable. 

A 6% per annum return on this investment should net $6,859,- 
471.93 per annum. In three years, if these companies had earned 6% 
on their investment, their net earnings would have been $20,579,415.80, 
whereas their actual net earnings for the period were $3,839,596.80. 
See Exhibit No. 1. 

The average value of stumpage in the tree in the South is $5.50 
per thousand, and sales have been consummated within the past two 
weeks on a basis of values as high as $6.00 per thousand, and it is 
impossible to purchase any timber at any lesser price, and this with- 
out any development, unless one should be able to profit by some other 
person's misfortune. 

From recent experiences in the development of property, i. e., 
the construction of camps, mills and railroads, the average cost of 
development is approximately $1.25 per thousand feet, but assuming, 
for argument, that it is $1.00 per thousand feet, this would mean a 
total cost of $6.50 per thousand to replace this property at the pres- 
ent market value of stumpage and the present cost of development. 

On this basis, the amount of stumpage which these plants have 
represents an investment, on a replacement value, exclusive of stocks 
of lumber, logs on hand, merchandise in company stores, and ac- 
counts receivable (which in themselves aggregate a vast figure) — of 
$145,422,603.30. 

A 6% annual return upon the actual replacement value would 
be $8,725,368.19. For the three years included, should this property 
have earned 6% on the basis of its replacement value, the earnings 
would have been $26,176,104.54, whereas, as per statement just made, 
on the actual charge for stumpage and depreciation, figuring on the 
basis of their actual operations for the entire period, their earnings 
have only been $3,839,596.80, and if the stumpage had been charged 
to the cost of operations at its actual replacement value at $5.50 per 
thousand and there had been no increase in the depreciation charge 
to cover the cost of replacement of plant account, instead of $4.35, 
the actual average charge which was made, this profit would have 
been reduced $5,981,670.97, which would have reflected the condition 
that actually existed of an actual loss of $2,142,074.11, and this during 
a period including one year which was the best year's earnings that 



22 FEDERAL TRADE COMMISSION HEARING 

has ever been known in the yellow pine lumber business, viz., the last 
half of 1912 and the first half of 1913. Note Exhibit No. 3. 

Now, if we had had such an agreement as we are asking you to 
permit us to enter into, so as not to produce lumber in excess of the 
public's requirements, under the plans submitted, and the price of 
lumber has been the maximum price secured in February, 1913, of 
$18.21, for the entire period, the profits of these companies, based on 
their actual average stumpage and depreciation charges as shown in 
their reports, would only have been, for the entire period, $27,913,- 
294.34, or only an average annual return of 6.4% on the investment. 

If, however, the actual cost of replacement of stumpage at $5.50 
per thousand had been charged to their operation, and the actual de- 
preciation, based on the cost of development of $1.00 per thousand 
had been used, instead of the results as reported, the earnings on such 
a basis would only have been $17,302,982.09, or an average of only 
3.96% per annum. 

Using the actual earnings as reported of $3,839,596.80 for the 
period, the per cent of earnings based on the investment arrived at 
by using the figures of stumpage and depreciation used by the various 
companies in arriving at their costs of production, and not including 
their inventories and accounts receivable, shows an earning of 1.12% 
per annum on their investment. 

Results of Operations from January 1st, 1912, to December 31st, 1914 

Since the first of January, 1912, to the 31st of December,. 1914, 
the situation is that during that entire period the production of yel- 
low pine lumber exceeded the consumption by 3.21% of the actual 
production of the three years. 

This resulted in an accumulation of 9.36% of one year's average 
annual production during this said period, or an accumulation of 
stocks equivalent to 45.2% of the stocks on hand at the beginning 
of the. period, and the price of lumber fell from the maximum price 
of $18.21 in February, 1913, to the minimum price of $11.70 in Decem- 
ber, 1914, or a reduction in values of 35%,%. See Exhibit Nos. 5 
and 6, which graphically disclosed the effect of the accumulation of 
surplus stocks on market values of lumber in this period. 

Reason for Difficulty to Secure Financial Aid 

It is generally understood in financial circles that the lumber busi- 
ness is in a desperate condition, and our present understanding is that 



CHAS. S. KEITH 23 

there are many lumber bond issues today which are either in default 
or give promise of being in default. The natural result is that lum- 
ber credits are being closely watched by the bankers and lumbermen 
are having difficulty in securing the proper financial aid to carry on 
their business, and while they are perfectly solvent and have ample 
security for any requirements they may need, the very nature of their 
most valuable asset, that of their timber, being slow in liquidation, 
renders them undesirable to the banker, who above all things de- 
sires to keep his lines liquid in order that he may realize upon them 
in times of stress or necessity. 

The Effect Upon Labor 

j You may readily understand that as the price of lumber has 
reached the point where it is less than the cost of production has 
brought about a situation where economies in operation have had to 
be created. One of the first things is the reduction in the numbers 
of those employed. The next step is a reduction in the wage of those 
employed, and these reductions range from 10% to 25%, although 
the compilations in Exhibits Nos. 7 and 8 will not disclose this to be 
the fact, for the reason that these reductions did not occur until the 
latter part of the year 1914, many of them not occurring until after 
November. In some instances, the wage scale has been continued but 
the working time has been increased 10%; with no increase in the 
wage, in order to reduce the cost, while in other instances the same 
wage scale is continued but the working time has been decreased. 
In all instances the employes have been injured. I think it is fair 
to assume, from my general knowledge of the situation and from 
statements which have been made to me covering the territories of 
Arkansas, Missouri, Louisiana, Texas, Alabama, Georgia, Florida, and 
the Carolinas by people who are operating in those states that the 
average wage has at least been reduced by reason of this condi- 
tion 10%. 

The Cost of Labor in the manufacture of lumber, as disclosed 
by Exhibit Nos. 7 and 8, for the year 1913 was $5.92 per thousand 
feet, and the saving made by a reduction of 10% in the wage scale 
is 59.2c per thousand feet. If the average wage of all the mills is 
the same as those of my own company, and that is, $2.00 per day, 
the effect upon the working man is that he receives 20c per day less 
than he would otherwise secure for this labor, which, on the basis 



24 FEDERAL TRADE COMMISSION HEARING 

of 285 days of operation per annum, means that each laboring man 
has or is contributing $57.00 per annum out of his rightful earnings 
to this unfortunate competitive condition. 

In addition to the reductions that have taken place in the wage 
scales, the decrease disclosed from these various companies' reports, 
amounts to a reduction, in dollars and cents, of materials and sup- 
plies used per thousand feet in 1914 as compared with 1913 of 19%c 
per thousand. The item of labor enters into manufacture of these 
articles consumed, and to at least an appreciable extent (roughly. 
50%) do these figures indicate that labor has been that much fur- 
ther affected. 

According to the Bureau of Census reports for the year 1909, 
there were 695,000 men engaged in the industry of lumber and tim- 
ber production. How many of these are directly engaged in the 
manufacture of lumber, and how many in the other branches of the 
industry, it is impossible for us to state, but the yellow pine industry, 
itself, recording to the figures reported for the year 1909, in the 
said Census reports, produced in that year 16,277,185,000 feet, and on 
the basis of 59.2c per thousand labor has contributed directly, by rea- 
son of this unfortunate competitive condition brought about by large 
tinder-consumption due to the reduction in railroad demand, to the 
reduction in foreign exports brought about by the war, and to the 
natural decrease brought about by the financial conditions imme- 
diately following the war, $9,636,094.52 per year. To this I believe 
it would be perfectly proper to assume the 50% decrease in materials 
and supplies used, amounting to 9.89c per thousand, should be added, 
or an additional amount of $1,609,813.60, making the total direct and 
indirect contribution on the part of labor $11,245,907.11 per annum. 

Effect Upon the Manufacturer 

The effect on the manufacturer, using the same basis of figures 
a3 production of 1909 just quoted, and the reduction in values from 
February 1st, 1913, to December 31st, 1914, of $6.51 per thousand, 
would indicate a reduction on the annual production, provided the 
situation does not change, of $105,964,474.45. 

The Effect on the Public as Regards Conservation — See Exhibits Nos. 

9 to 16, Inclusive 

In addition to the loss to the working man and the loss of the 
capital employed in the industry by reason of these present condi- 



CHAS. S. KEITH 25 

tions, another condition in the situation presents itself, which is 
equally injurious to the public good, and that is the question of waste 
in our forest products. Illustrating what I mean in this matter, in 
order to produce anywhere near profitably, in addition to making 
the reductions necessary in wages and other economies, which are 
eventually absorbed by competition, to move our surplus stocks, it 
is necessary to bring only that portion of the tree which is harvested 
in the form of logs to the mill for manufacture which will return 
the cost of transportation, manufacture and distribution. 

Naturally, with the falling of prices, a large portion of the tree 
eventually reaches the point where it not only cannot be profitably 
manufactured but cannot be manufactured at a price that will re- 
produce itself in cost of production. I believe it is safe to assume, 
and the photographs attached hereto and marked as Exhibits Nos. 
10 to 16, inclusive, would clearly indicate, that at the present time 
there is at least 30% if not more, of the tree which is left in the 
woods to rot and waste by reason of this condition. 

Applying this situation to the yellow pine industry and using 
the 1909 figures of production, which were 16,277,186,000 feet, on the 
basis of a harvest of 130% logs, there will be harvested in the year 
1915, providing the ratio of production is the same as that of 1909, 
21,160,340,500 feet of yellow pine logs, and from this source there is 
being wasted 4,884,155,600 feet per annum, which, on the basis of 
the present value of standing yellow pine timber of $5.50 per thou- 
sand, will create a waste in this year, in dollars and cents, from this 
source, alone, of $26,857,355.25. In addition to this the further re- 
sult is, in a period of 3% years, of the total harvest of yellow pine 
timber, practically one year's consumption has been wasted. 

When we realize that the forest resources of the United States 
are limited in their area, and that we have an increasing and growing 
population, which is absorbing year after year more lumber, in its 
final analysis we are bringing the time closer every day that this 
condition maintains to where the prices of lumber must be excessively 
high and will not be within the reach of a large portion of the 
public. 

This condition has been maintaining since 1880. The source of 
supply of lumber has been gradually changing, with the added cost 
of transportation, and bring the cost of consumption continually 
higher, which situation would not have been maintained to the pres- 
ent degree had there been exercised a reasonable method of conserva- 



26 FEDERAL TRADE COMMISSION HEARING 

tion. No effective conservation method has ever been put in opera 
tion, by reason of the fact that under a strict interpretation or applica- 
tion of the letter of the Sherman or other trust acts it is imprac- 
tical, and because of the very nature of our divisional form of Gov- 
ernment, it has been impossible to suggest or secure uniform legisla- 
tion, and consequently the necessity of some form of agreement, 
which by reason of its very nature would probably have been con- 
strued to be in restraint of trade. 

In addition to this condition, another cause contributing to the 
over-production in yellow pine lumber is the present method of pro- 
ducing Naval Stores, making it imperative that the timber be utilized 
soon after the turpentining operations are ended, otherwise this tim- 
ber would be attacked by worms and rot and fires, which fires, not 
only destroy the matured timber which has been turpentined, but 
also destroys the young growth. If the territory producing turpen- 
tine for Naval Stores were deriving any benefit from the operation, 
we would not be disposed to interject this into the consideration of 
lumber, but our understanding at the present time is that it is diffi- 
cult for the Naval Stores people to realize cost, and, therefore, there 
should be some method by which Naval Stores operators may regu- 
late their production so as not to enforce a production of lumber 
from this timber during a time that such conditions exist. 

The Total Effect on the Manufacturer, Labor, and the Public 

Using the figures which I have shown before of reduction in 
values of $105,964,474.35, the reduction by reason of loss of stumpage 
of $26,857,355.25, would indicate that the yellow pine manufacturers 
had contributed to this situation a loss in stumpage and earnings of 
$132,821,829.60 per annum, while labor has contributed $11,245,907.11 
per annum additional, making a total direct loss of $144,067,736.71 
per year. 

This, generally, is the condition in the lumber business, We are 
anxious that you should ask us all the questions which you desire 
to ask us in the matter, and we are here for the purpose of frankly 
and honestly stating to you the facts as we know them and as we 
believe them to be. 

We desire to suggest to you as a means of curing this situa- 
tion the thought we have in mind, and that is, not to restrain trade, 
not to fix prices, but to produce, by agreement, only as much lumber 



CHAS. S. KEITH 27 

as the market will assimilate, under and by the supervision of your 
Commission. 

Plan 

On such a basis, if we could apply the principle to the industry, 
where a previous month might show that 2% of the production of 
that month had been accumulated in the form of stocks, and assum- 
ing that our current month's operation would disclose practically 
the same situation as had obtained in the previous month, we would 
reduce, by agreement, our operation in hours, for the current month, 
4%, so as to absorb the accumulation of the previous month and pro- 
duce only as much lumber as might be necessary to take care of the 
current demand, changing the reduction of hours of operation, from 
month to month, as the condition of the previous month might indi- 
cate, from compilations of supply and demand made monthly. 

We believe that this would not be in violation of the law, as it 
would not restrain trade or lessen competition, since the trade would 
be able to secure all the timber that it could use, while we believe 
that the effect would be to keep the market stable, and enable the 
public to forecast with more certainty market conditions. 



Application and Effect 

At this point I wish to call your attention to Exhibits 17, 18 
and 19. 

Exhibit No. 17 discloses the way the stocks would have gone 
had that principle been applied in the last three years. Not knowing 
what the price of lumber would be we assumed as a matter of argu- 
ment that the price of lumber would remain stationary in that con- 
dition at the point at which it was in February, 1913, instead of going 
down by reason of the accumulation of surplus stocks. 

The Chairman: "Would that assumption be justified? 

Mr. Keith: Absolutely. I do not believe, unless you have a 
demand in excess of your ability to supply the lumber, your price 
will advance. But if you are producing one-half of one per cent 
more lumber than the market will assimilate, it is going to have the 
effect of reducing your values. It is not the one-half of one per 
cent which you accumulate in any given month, but it is the pro- 
cess of cumulative accumulations which occur during a period of 



28 FEDERAL TRADE COMMISSION HEARING 

several months, and it brings it up to the point where you must 
move your product, because if you do not, it is rotting in the stacks 
and is deteriorating in value. This is especially true of yellow pine. 

Applying this same principle against the operations of yellow 
pine lumber for the last three years, assuming that this had been 
done instead of that which was done, the result would have been a 
production of lumber 3.85% less than was actually produced, or, in 
other words, there would have been .64 of 1% less lumber manu- 
factured than the market would have actually assimilated during that 
period. However, as the average stocks on hand on the beginning 
of this period were 19.85% of the average annual production, the 
result would have been that we would still have in the neighbor- 
hood of between 17% and 18% of our annual production in the hands 
of the manufacturer, plus the amount of stocks on hand in the yards 
of the retailers, from which stocks the trade could have been readily 
cared for, and in no instance would the trade have been restricted. 
On the other hand, prices would have been level, there would have 
been some profit in the business, labor would have been kept more 
steadily employed and at better rates of pay, the entire harvest of 
logs would have been utilized, and the public demand would be able 
to be fully supplied from present operations at lower rates of trans- 
portation with the benefits of real competition for a longer period of 
time, all of which is the highest form of conservation. 

At this point I wish to mention the fact in the memory of every man 
in the room, when white pine lumber was manufactured on the Missis- 
sippi River at St. Louis, Hannibal, Rock Island and other points. At 
that time the logs were floated down the river and they were manufac- 
tured there and transported to the interior at low rates of freight. As 
the cutting of the pine in the North gradually vanished, the supply of 
lumber was brought from the South. Now we are in the same process 
today in the South that the white pine was in the North some ten years 
ago. We are over the hill in the point of production. From now on our 
production must gradually grow less, and as it does grow less, then from 
the Northwest Coast must come the supply for the future. And as that 
supply comes, you will readily appreciate that the cost will increase, as 
compared with the price of $1 a thousand to float logs down the river as 
against the proposition of paying 50 cents per 100 pounds today from the 
Pacific Coast to the people in Hannibal. 

What I mean by this particular point, the quicker this timber is cut 
out, the higher the cost of timber is going to be, and the higher the cost 



CHAS. S. KEITH 29 

of lumber is going to be, and the sooner they are going to have to go to 
other fields of supply in order to take care of their consumption. 

Length of Time Necessary to Reduce Present Stocks to Normal 

If you should grant us such relief as we ask for and the same results 
for future years would apply as figured out as the probable effect for the 
three years referred to, it would take, at the rate of 64/100 of 1% 
production under consumption, at the present rate of consumption, at 
least fifteen years to reduce present stocks to normal. 

At this point I want to say that if the cost should become below the 
basis which you believe to be normal, it can be stopped so that the situa- 
tion of producing less than the market can assimilate can be taken care of. 

The Chairman: Of course you appreciate that our power is 
limited under the act. 

Mr. Keith: I appreciate that, and on that point I want to in- 
troduce to you a brief drawn on that subject by our counsel. I expect 
you have had lots of briefs and are probably having all kinds of advice 
on that subject. But even if you have not the authority now, the 
condition of our business certainly discloses or should disclose the 
necessity of your having such authority, and even if you cannot grant 
us relief today, it certainly can lay the groundwork of seeing that 
Congress does recognize the situation, to pass on and give you such 
authority. 

Further in connection with this situation, would state that according 
to census reports of 1909, there were 17,359 yellow pine manufacturers 
engaged in the production of yellow pine. Even should you agree that 
our contention would not be in restraint of trade but lawful, it would 
be practically impossible to secure anything like any large percentage 
of this number of manufacturers to an agreement of this or any other 
character. It is barely possible that 50% of the output of yellow pine 
lumber might reach such an agreement, but the 50% of the total manu- 
facture of the output of yellow pine lumber would not in any manner 
approximate such a thing as 50% of the total number of those engaged 
in the business. Many of these mills are very small, but all seek a market 
through some avenue, either locally or through jobbers, or sell their 
product direct through their own sales agencies. I doubt very much if 
we could in the fifteen years above mentioned equalize our stocks by 
producing even 1% per annum less than the market assimilated. You 
can readily see that there could be no possibility of lessening com- 
petition. 



30 FEDERAL TRADE COMMISSION HEARING 

General 

At this time I wish to file with you statement by our counsel, in 
the form of a brief, touching the legality of the method and powers of 
the Commission. (See Page 34.) 

I wish to further state that the effect of retrenchments for the 
purposes of economy in the operation of an industry reacts upon all 
other dependent industries, and that the effect upon the consumer and 
the laborer in our own industry, and upon dependent industries, reacts 
again and again upon the other producers and their dependents and all 
are affected. 

We believe that some good, sound method may be either suggested 
to your honorable body, or that you may be able to suggest to us, as a 
means out of our unfortunate and difficult situation can only react in the 
interests of the public good and general prosperity. 

Now if there are any questions you would like to ask in connection 
with the business which I can answer, I would be glad to do so. 

The Chairman: You will be here to morrow? 

Mr. Keith: Yes. 

The Chairman: We have a few questions. 

Mr. Keith: We have some other witnesses too, that we have 
brought here to fortify this. I did not know how you gentlemen wanted 
this presented. I have all the figures that went to make up this com- 
pilation, but I would like to keep them to make an analysis for our 
association ; but if you wish them, I can have them presented by having 
an affidavit made by each company who presented them, and can file 
them in support of these general exhibits and compilations. 

The Chairman: Of these twenty-three different companies? 

Mr. Keith: There are twenty- three different companies used in 
this compilation. There were twenty-five who furnished the general 
information. Of the twenty-three companies I do not know just how 
many these represent. One I have in mind represents nine, another 
sixteen, and we represent four, and so on down the line. But all of these 
companies who furnished these figures which I have presented to you 
here are among the very best manufacturers in the business. Any lum- 
berman in the room will tell you what I am telling you to be true, it 
makes no difference whether he is from the North, the Southeast, the 
Southwest or from the Northwest. And we would be very glad to file 
all the details, with affidavits attached, or bring the witnesses before you 



CHAS. S. KEITH 31 

at some future time and put them on the stand and have them give the 
information under oath. 

The Chairman: We will take that up. later. 

Commissioner Hurley: I would like to ask you in connection 
with your taxes in the respective states; is that a serious problem? 

Mr. Keith: Yes, your Honor, it is quite a serious problem. For 
instance, the taxes have been gradually growing. Take, for instance, 
in the State of Louisiana, sugar lands in Louisiana are taxed at ten 
dollars an acre, and pine lands in Louisiana are taxed twenty-five dollars 
an acre, and they both have the same mill tax. The pine land produces 
a crop every one hundred and fifty years and the sugar land produces a 
crop every year. There has been a growing tendency to increase the 
assessment on land in all of the states. 

I personally have felt that the only proper tax for lumber or any 
other natural resource, such as coal or lumber, ought to be on an output 
basis. There is an objection to that on account of those who own vast 
amounts of timber and coal lands which are not in operation, but I 
believe if it were to be on output tax, it would have a tendency to 
conserve the holdings of both characters of raw material and be of real 
good so far as the public is concerned, although the burden on an indi- 
vidual operator might be a little greater than it might otherwise be, 
especially with a man with a timber supply of short life. 

The Chairman: How long has this disparity between sugar and 
pine land obtained? 

Mr. Keith: Practically since 1903. 

The Chairman: And prior to that time? 

Mr. Keith: Prior to that time timber land was worth practically 
nothing in the South and taxation was very low, but the taxes are 
gradually increasing. I believe I would be safe in making the statement 
that the present area of timber is paying more tax than the original 
timber paid before any of it was exhausted. You take in our section in 
Louisiana ; in 1911 it showed at that time that 50.7 per cent of the total 
timber in the State of Louisiana had been exhausted, and we have been 
for four years longer cutting, and we believe we have only about 
38 billion feet in the State of Louisiana, or had at that time. 

Commissioner Hurley: How many acres of timber land is there 
development on, roughly ? 

Mr. Keith: I could not answer the question. Mr. Smith of the 
Forest Department of the government estimated something like 3 trillion 
feet of timber. 



32 FEDERAL TRADE COMMISSION HEARING 

Commissioner Hurley: Has that land decreased in value in the 
last three years? 

Mr. Keith: No, none of it has decreased. There is a difference 
between timber and lumber. For instance, I will illustrate that. 

If you have got two figures, one representing supply and the other 
demand, one continually increasing and the other continually decreasing, 
that which is decreasing being that which is in the amount, and that 
which is increasing being that which is in consumption, the natural 
result is the enhanced value of the article produced. 

For instance, timber is not reproducing itself, there is no reforesta- 
tion going on. Every day we cut timber we are reducing the amount of 
available timber supply of the United States. 

Now, on the other hand, according to the figures of 1909, the con- 
sumption per capita of the United States at that time was 500 feet board 
measure. Our population is increasing at a ratio of about 1,500,000 
people a year, figuring on the basis between 1900 and 1909, consequently 
we are having an accumulative increase in demand under normal condi- 
tions of three-quarters of a billion feet of lumber annually ; in ten years 
that is an increase of 7,500,000,000 feet of lumber, and all the time tak- 
ing care of the demand which is already there. With the increasing and 
accumulative demand, our timber supply is gradually and rapidly being 
reduced. And as the timber supply is reduced, the few available tracts 
that are left for development in the hands of timber owners are growing 
proportionately higher in value. For instance, we cannot buy timber 
today in Calcasieu or Vernon Parishes, Louisiana, for less than six 
dollars. I would hate to buy any at six dollars and operate it under this 
market; we would go broke on it. But if we want to buy timber to 
increase the life of our property, so as to conserve the value of our 
investment, we would have to pay six dollars. Timber values are on 
the increase in value, but lumber is not increasing. 

Commissioner Hurley: Under this plan of selling the products 
and working together, is it your thought that that will keep the price 
as it is at present or increase the price ? 

Mr. Keith: It would not increase the price. It would have 
this effect : Supposing that our demand this year had been 175 per cent 
of our production, naturally prices would have enhanced under that 
condition. By applying this principle, it would keep your price sta- 
tionary. Every time it made a gain it would stay there, but it would not 
of itself enhance the value ; it would simply keep it from declining. 



CHAS. S. KEITH 33 

Commissioner Hurley: You figure that your plan will intro- 
duce a lot of economies in the way of selling your product ? 

Mr. Keith: We want to enter into that. For instance, in our 
association we are entering the proposition of cost accounting. 

There, I think, is one of the greatest troubles we have. I will 
venture to say the yellow pine industry today has no conception of what 
it costs to manufacture lumber. These figures — I will be frank with 
you — startled me. We have always considered our cost of production, 
taking our raw material, labor employed and materials used and taxes, 
insurance and matters of that kind, and figured simply the manufac- 
turing cost, as a matter of accounting. They have never considered the 
cost of distribution and they have never considered the general expense 
or interest and exchange as being a part of the cost of manufacture, and 
we have been selling against a fictitious cost price. I believe if the 
gentlemen in our business were thoroughly educated to their business 
and knew that $14.50, as an illustration, was the cost, they would not be 
selling lumber for $11.70. But they do not know it, and a great many 
of them, I believe, get their cost figures but once a year and do not know 
what they are doing until the end of the year. Some of them get them 
once a month. So far as our company is concerned, we have our labor 
costs every day and know what it costs to manufacture every day. 

The Chairman: Mr. Keith, I would like to ask, have you any 
available figures upon the extent of the growth in substitutes employed 
in industries in place of timber, as affecting southern pine? 

Mr. Keith: No, I have not, but you take from 1899 to 1909, the 
increase in cement, I think, went from 10 million to 80 million barrels, 
and yet during that same period the consumption of lumber per capita 
went from 460 to 532 feet. And I have been told in the last week that the 
United States Steel Corporation make the statement that the consump- 
tion of nails has fallen off one million kegs a year. Now, the only 
place we can use nails is in lumber, and that probably gives us some idea 
of the story. 

The Chairman: Mr. Keith, in this exhibit are the names of the 
twenty-three sawmill companies furnished? 

Mr. Keith: No, but I would be glad to furnish that list, and 
will be glad to furnish the original figures with affidavits attached. 

The Chairman: We will take that up later, but we would like 
the list anyway. 



34 FEDERAL TRADE COMMISSION HEARING 

SUGGESTIONS AS TO LEGAL PHASE OF MATTER PRE- 
SENTED AND THE POWERS OF THE COMMISSION 
IN REFERENCE THERETO 

L. C. Boyle, Kansas City, Mo. 

In offering these suggestions, I make no pretense of intimate 
familiarity with the facts and conclusions presented by Mr. Keith on 
behalf of the Southern Pine Association. I adopt these facts and con- 
clusions as a premise and will attempt a brief discussion of the Federal 
Anti-Trust Law as applied thereto. 

The Clayton Bill was passed as a supplement to the Sherman Anti- 
Trust Law. There is nothing, however, in the substantive law features 
of the Clayton Bill that touches the matter here to be considered. 

This Commission was created, however, to not only enforce and 
advise as to certain of the provisions of the Clayton Bill, but also to 
examine and give its aid touching industrial conditions which would 
naturally come within the purview of the Sherman Law proper. 

It will be but necessary for us to consider the first two sections 
of the Sherman Law. They are as follows : 

"Section 1. Every contract, combination in the form of trust 
or otherwise, or conspiracy, in restraint of trade or commerce among 
the several states, or with foreign nations, is hereby declared to be 
illegal. Every person who shall make any such contract or engage 
in any such combination or conspiracy, shall be deemed guilty of a 
misdemeanor, and, on conviction thereof, shall be punished by fine 
not exceeding five thousand dollars, or by imprisonment not exceeding 
one year, or both said punishments, in the discretion of the court. 

Section 2. Every person who shall monopolize, or attempt to 
monopolize, or combine or conspire with any other person or persons, 
to monopolize any part of the trade or commerce among the several 
states, or with foreign nations, shall be deemed guilty of a misde- 
meanor, and, on conviction thereof, shall be punished by fine not 
exceeding five thousand dollars, or by imprisonment not exceeding 
one year, or by both said punishments, in the discretion of the court. ' ' 

Although the suggestion at this time may seem more academic than 
useful, I call attention to the industrial condition of the times that 
prompted Congress to enact this law. In the Standard Oil case, Chief 
Justice "White, speaking for the court, and directing attention to the 
debates in Congress, says: 



L. C. BOYLE 35 

"They conclusively show, however, that the main cause which 
led to the legislation was the thought that it was required by the 
economic condition of the times, that is, the vast accumulation of 
wealth in the hands of corporations and individuals, the enormous 
development of corporate organization, the facility for combination 
which such organizations afforded, the fact that the facility was being 
used; and that combinations known as trusts were being multiplied, 
and the widespread impression that their power had been and would 
be exerted to oppress individuals and injure the public generally." 

The current history of the period prior to 1890 demonstrates that 
it was the growing tendency of capital to combine in the form of trusts 
that brought about this legislation. Congress sought to preserve free 
and untrammeled competitive conditions. I shall undertake to demon- 
strate that the Southern Pine Association has no desire to violate either 
the letter or the spirit of this Congressional purpose. 

It is to be noted that under the strict letter of Section 1, every 
contract, combination in form of trust or otherwise, was inhibited. 
The Standard Oil case was decided in May, 1911. The period between 
July, 1890 (when the Sherman Law was placed on the statute books), 
and 1911 was one of grave concern to the business interests of the 
country. Those business organizations that were going concerns prior 
to 1890 went forward at their peril. Men of affairs hesitated to initiate 
great enterprises in face of the unyielding letter of this law. 

Those vital and essential principles that had, as a result of the 
wisdom of centuries, been engrafted on the common law, were, accord- 
ing to the cold letter of the Act, entirely cut off. 

Very instructive is the reading of the literature of this ten-year 
period as the same relates to the statute. 

The Supreme Court in the Standard Oil case read the "Rule of 
Reason" into the statute, thereby reviving the principles of the com- 
mon law as the same were applied to trade restraint. As to this thought 
the Chief Justice says : 

"It was intended that the standard of reason which had been 
applied at the common law and in this country in dealing with sub- 
ject of the character embraced by the statute, was intended to be the 
measure used for the purpose of determining whether in a given case 
a particular act had or had not brought about the wrong against 
which the statute provided." 

This pronouncement of the Supreme Court had the temporary effect 
of stimulating industrial activity. 



36 FEDERAL TRADE COMMISSION HEARING 

The conscience of the people, however, had been outraged by many- 
evidences of the overreaching and oppressive practices indulged in by 
greedy organizations of capital. It became the fixed thought of a great 
majority that the people were being exploited for the benefit of selfish 
interests. A period of agitation set in. A determined purpose, on the 
part of the public, was made manifest that unconscionable methods in 
the nation's industrial development should be eliminated. Wholesale 
prosecutions by state and federal authorities were instituted. 

This widespread agitation has indeed brought wholesome results, 
but in eradicating an evil, legitimate and vital business interests have 
been jeopardized. Under the activity of ambitious prosecutors the 
nebulous margin of the "Rule of Reason" became a greater menace 
to honest enterprise than the strict letter of the statute had been in 
the first instance. "When the fervor of prejudice began in a measure 
to abate and dispassionate public opinion realized the handicap that 
the substantial and legitimate business interests of the nation were 
under as a result of legal uncertainty, there developed a very general 
expression of opinion that some method should be adopted in aid of 
the Anti- Trust laws, whereby honest business might go forward with- 
out the ever present menace of prosecutions and expensive and long 
drawn out litigation. 

As a result of this public expression, emanating as it did from 
the ranks of labor as well as from the office of the employer, all 
political parties in our last national election pledged, in their plat- 
forms, relief from this intolerable condition, a condition that has not 
alone crippled industry itself, but as a necessary sequence placed a 
heavy burden on labor. Finally when Congress assembled, the crystal- 
lized expression of the people's judgment was made manifest by the 
President in his message. Among other statements we find the fol- 
lowing : 

"The business of the country awaits also, has long awaited and 
has suffered because it could not obtain, further and more explicit 
legislative definition of the policy and meaning of the existing anti- 
trust law. Nothing hampers business like uncertainty. Nothing 
daunts or discourages it like the necessity to take chances, to run 
the risk of falling under the condemnation of the law before it can 
make sure just what the law is. * * * 

And the business men of the country desire something more than 
that the menace of legal process in these matters be made explicit 
and intelligible. They desire the advice, the definite guidance and 



L. C. BOYLE 37 

information which, can be supplied by an administrative body, an 
interstate trade commission. 

The opinion of the country would instantly approve of such a 
commission." 

In obedience to the general demand the Trade Commission was 
created. Undoubtedly it was the common understanding that the Com- 
mission as created was vested with power to aid and counsel business 
in matters of the very character suggested by the data presented. 

Before addressing my thought to the powers of the Commission 
touching the vital needs of the Yellow Pine Industry, let us briefly 
consider the appeal for relief as made by the representatives of these 
manufacturing lumbermen. It is made evident, and this beyond the 
cavil of debate, that a great and needed industry is being crippled and 
plundered as the result of over-production. 

The evils that follow in the wake of this unnatural condition are 
manifold. To call attention to just a few: 

1. The investor suffers and in the end the weak must go to the wall. 
Investigate the demand for timber bonds. 

(The grim irony of this situation is found in the fact that this 
very result is brought about through the menacing threat of a law 
that was designed to protect the weak from the oppression of the 
strong. ) 

2. Labor suffers. 

It is fundamental that if an industry operates at a loss, labor must 
carry its part of the burden. 

Examine the data as to labor. 

3. Forest waste. 

Here indeed is a great and vital question. The conservation of a 
rapidly diminishing natural resource is a subject of grave concern. 
In no other civilized country in the world would such waste be per- 
mitted, much less be made unavoidable, through fear of criminal prosecu- 
tions, if the logical means be adopted to stay the ravage. 

Overproduction, coupled with uncontrolled competition makes 
forest waste unavoidable. The data illuminating this phase of the 
subject is readily secured, not alone from private manufacturers, but 
from the Government itself. The United States is an extensive timber 
owner and suffers from the very conditions now afflicting private 
operators. 

The fable of the serpent stinging itself is here well illustrated. 



38 FEDERAL TRADE COMMISSION HEARING 

Surely it cannot be urged with reason that all of these baleful 
results could have been within the purpose of Congress when it placed 
upon the statute books of the nation the Sherman Law. 

And yet it is because of the fear of this very law that condi- 
tions exist as here outlined, and more fully made evident in the data 
presented. 

Inviting the fullest investigation and frankly submitting them- 
selves for all and every inquiry, these business men ask this Commission 
for aid and guidance. 

They ask the right to agree among themselves, under a plan to 
be fully presented to this Commission, to curtail their output, so as to 
avoid accumulation of surplus stock. 

There is no purpose to hamper, or in the slightest degree inter- 
fere with, competitive conditions; no purpose to attempt to fix prices; 
no thought of dividing territory; no pooling arrangement, nor trust 
agreement; no scheme involving monopoly or tendency thereto. In 
brief, no suggestion of doing anything that could be construed as re- 
straining the free flow of commerce. The volume of output always to 
measure up to the needs of consumption. 

The sole factor to be eliminated is the destructive feature of over- 
production. A result, which, in its ultimate analysis, will be of value 
to the public and at the same time give to the producer a living margin 
of profit — for, with competition free, prices must and will range with 
the demand. 

After a somewhat careful study of the rulings of our courts on 
the Sherman Law, I am convinced that an agreement, having for its 
object the sole result here indicated, does not impinge on the Anti-Trust 
statute. 

The query may suggest itself that if the plan is not violative of law, 
why not go forward and operate under it? 

The trouble is the lawyer so advising has not the last guess. 
Another lawyer, who has been elevated to the bench, may hold a different 
opinion. It was to meet this very condition that the Commission was 
created. 

The situation is one of urgent need. Common sense, the public 
good, the principles of justice all unite in urging the relief here sug- 
gested. 

As matters now stand, only the choice portions of the log are 
harvested. Trustworthy data demonstrates that thirty per cent of the 
cut is left to rot in the woods. There is an estimated loss of forty-five 



L. C. BOYLE 39 

million dollars annually. This is a loss for which there is no re- 
placement. 

For the sake of argument, permit an assumption : 

If the tillable land area of the United States was circumscribed 
(as is available timber supply) and as a result of trade conditions only 
the choice portions of crops could be marketed, the residue going as 
Avaste, and owing to this unhealthy condition the soil was being an- 
nually robbed of its fructifying qualities, and this to such an extent as to 
ultimately threaten public welfare, is it conceivable that our Anti-Trust 
law would be so interpreted as to make unlawful an agreement among 
farmers to honestly relieve such a condition? 

The dilemma in which the manufacturing lumbermen find them- 
selves is much more drastic than the supposititious condition adverted to. 
The farmer can rehabilitate his soil, but the tree is gone forever. 

Surely there is a way out of this untoward situation. I am con- 
vinced that the Commission will give such aid as it can. 

To the end that the Commission may find its task less difficult, I 
take occasion to make reference to illuminating rulings of courts in 
construing the statute under review. These references are made as 
an aid to the conclusion that the relief here urged does not fall under 
the ban of the law. 

First. I call attention to the well established principle that those 
agreements are recognized as valid which have for their sole object 
the furtherance of trade conditions, and the legitimate needs of the 
industry. In this connection, note the fact that the motive actuating 
the parties is to be considered. 

United States v. Reading Co., 226 U. S., 324. 

"Whether a particular act, contract or agreement is a reasonable 
and normal effort in furtherance of trade and commerce may, in 
doubtful cases, turn upon the intent to be inferred from the extent 
of the control thereby secured over the commerce affected, as well as 
by the method which was used." 

Anderson v. United States, 171 U. S., 604. 

"The same is true as to certain kinds of agreements entered into 
between persons engaged in the same business for the direct and bona 
fide purpose of properly and reasonably regulating the conduct of 
their business among themselves and with the public. If an agreement 
of that nature, while apt and proper for the purpose thus intended, 
should possibly, though only indirectly and unintentionally, affect 
interstate trade or commerce, in that event, we think the agreement 



40 FEDERAL TRADE COMMISSION HEARING 

would be good. Otherwise, there is scarcely an agreement among men 
which has interstate or foreign commerce for its subject that may not 
remotely be said to, in some obscure way, affect that commerce, and 
to be therefore void. * # * 

In order to come within the provisions of the statute, the direct 
effect of an agreement or combination must be in restraint of that 
trade or commerce which is among the several states or with foreign 
nations. Where the subject matter of the agreement does not directly 
relate to and act upon and embrace interstate commerce, and where 
the undisputed facts clearly show that the purpose of the agreement 
was not to regulate, obstruct or restrain that commerce, but that it 
was entered into with the object of properly and fairly regulating the 
transaction of the business in which the parties to the agreement were 
engaged, such agreement will be upheld as not within the statute, 
where it can be seen that the character and terms of the agreement 
are well calculated to attain the purpose for which it was formed, 
and where the effect of its formation and enforcement upon inter- 
state trade or commerce is, in any event, but indirect and incidental, 
and not its purpose or object." 

It has been held in a large number of cases that transactions which 
are related to interstate trade and commerce indirectly and affect such 
commerce only in a remote way will not operate to bring an agreement 
or association or combination within the interdict of the Act. 

V. S. v. Freight Assn., 166 U. S. 290 ; 41 L. Ed., 1007. 
U. S. v. Joint Traffic Assn., 171 U. S., 505 ; 43 L. Ed., 259. 
Anderson v. U. S., 171 U. S., 604; 43 L. Ed., 300. 

U. S. v. American Tobacco Co., 221 U. S., 113. 

"The Sherman Act applies when the direct result or necessary 
tendency of the prohibited thing, contract, combination, etc., is mate- 
rial obstruction, hindrance or restraint of interstate or foreign com- 
merce." 

U.'B. v. U. P. R. R. Co., 188 Fed. Rep., 109. 

"To bring any transaction within the condemnation of the first 
section of the anti-trust law, it must be a contract, combination, or 
conspiracy in restraint of interstate or international commerce. This 
restraint must be substantial in character and the direct and imme- 
diate effect of the transaction complained of." 

U. 8. v. Bu Pont de Nemours & Co., 188 Fed. Rep., 151. 

"To what extent the anti-trust act condemns combinations that 
restrain full and free competition in interstate trade is a question that 



L. C. BOYLE 41 

has been much debated. » For a dozen years, at least, it has been set- 
tled that it does not condemn combinations which only indirectly, 
remotely, or incidentally restrain interstate trade." 

U. 8. v. Trans. Mo. etc., Ass% 58 Fed., 58. 

"The test of the validity of contracts or combinations in restraint 
of trade is not the existence of restriction upon competition imposed 
thereby, but the reasonableness of that restriction under the facts 
and circumstances of each particular case. Public welfare is first con- 
sidered, and, if the contract or combination appears to have been 
made for a just and honest purpose and the restraint upon trade is 
not specially injurious to the public and is not greater than the pro- 
tection of the legitimate interests of the party in whose favor the 
restraint is imposed reasonably requires, the contract or combination 
is not illegal. 

jt, Jt» .. «m» '' ae. ■ jfr : ' m* -V- 

w w w w w w w 

The test of the legality of a combination under the Anti-Trust 
Act is its necessary effect upon competition in commerce among the 
states or with foreign nations. 

If its necessary effect is only incidentally or indirectly to restrict 
that competition, while its chief result is to foster the trade and 
increase the business of those who make and operate it, it does not 
violate that law." 

To quote further would extend the matter too far. It can be 
fairly stated, however, that the thought expressed in the excerpts given 
runs through all the cases where the facts of the case suggested discus- 
sion of the point. 

In the light of this fixed and indeed essential interpretation of the 
law can it be urged in frankness that the suggested plan for relief here 
urged comes within the condemnation of the statute ? — a plan so vital to 
the needs of the industry, and one whereby the public is indeed the 
principal beneficiary. 

It is true the curtailment of output, to the limited extent suggested, 
would have the natural tendency of steadying prices, but this result 
in no way restrains commerce, nor in any view of the situation can it 
be argued that such a plan works for monopoly. 

We should not be led into error in considering the suggested relief. 
It is not the object to curtail output for the purpose of fixing prices, 
and thereb}^ dictating to the consumer. On the contrary, competition 
is left absolutely free and commerce is thereby unimpeded. 

Touching this question of price as the same may be incident to 
agreements, etc., the Patten case is instructive : 



42 FEDERAL TRADE COMMISSION HEARING 

U. 8, v. Patten, 187 Fed., 671. 

''Manifestly the result which the conspirators aimed at was to 
compel speculators short of cotton to settle at abnormally high prices ; 
a process sometimes called 'squeezing the shorts.' Manifestly, also, 
the raising of prices in other cotton markets than the New York 
Cotton Exchange was in itself no part of the scheme of the con- 
spirators. Still, prices of cotton are so correlated that it may be said 
that the direct result of the acts of the conspirators was to be the 
raising of the price of cotton throughout the country. But it does not 
follow, in my opinion, that because exceedingly high prices of cotton 
were to be brought about, interstate commerce was to be directly 
affected and obstructed. On the contrary, it seems clear that any 
effect upon interstate commerce in the way of curtailing shipments, 
or otherwise, would have been merely incidental to the high prices. 

The broad contention of the government is that any combination 
which interferes with the right of the manufacturer to purchase a 
commodity moving in interstate commerce at prices determined by 
the competitive law of normal market conditions directly restrains 
interstate commerce and violates the federal anti-trust statute. I can- 
not assent to this proposition. There is no direct relation between 
prices and interstate commerce. The volume of shipments does not 
necessarily depend upon the lowness of prices. Innumerable other 
factors enter into the problem. The continuation of normal market 
conditions might or might not curtail interstate commerce. But if it 
curtailed by upset market conditions that which produced such result 
would still only indirectly affect such commerce." 

Second. The prime object of the law is to keep the channels of 
commerce free from restraints on competitive conditions. This indeed 
is the very touchstone of the law. "Where competition is absolutely free, 
there can be no restraint of trade, nor can monopoly exist. 

Standard Oil Co. v. V. S:, 221 U. S., 56. 

"Without going into detail and but very briefly surveying the 
whole field, it may be with accuracy said that the dread of enhance- 
ment of prices and of other wrongs which it was thought would flow 
from the undue limitation on competitive conditions caused by con- 
tracts or other acts of individuals or corporations, led, as a matter 
of public policy, to the prohibition or treating as illegal all contracts 
or acts which were unreasonably restrictive of competitive condi- 
tions, either from the nature or character of the contract or act or 
where the surrounding circumstances were such as to justify the con- 
clusion that they had not been entered into or performed with the 
legitimate purpose of reasonably forwarding personal interest and 
developing trade, but on the contrary were of such a character as to 
give rise to the inference or presumption that they had been entered 



L. C. BOYLE 43 

into or done with the intent to do wrong to the general public and to 
limit the right of individuals, thus restraining the free flow of com- 
merce." 

Phillips v. I ola Portland Cement Co., 125 Fed., 593. 

"The test of the violation of the Anti-Trust Act, by a contract 
or combination, is its effect upon competition in commerce among 
the States. If its necessary effect is to stifle or to directly and sub- 
stantially restrict interstate commerce, it falls under the ban of the 
law, but if it promotes, or only incidentally or indirectly restricts 
competition, while its main purpose and chief effect are to promote 
the business and increase the trade of the makers, it is not denounced 
or avoided by that law." 

Field v. Barber Asphalt Paving Co., 194 U. S., 618. 

"The Sherman Anti-Trust Act is not intended to affect contracts 
which have only a remote and indirect bearing on commerce between 
the States." 

TJ. S. v. Beading Co., 183 Fed. 459. 

"One of the purposes of the Anti-Trust Act, in making illegal 
every contract, combination, or conspiracy in restraint of trade or 
commerce among the several States, is to maintain interstate com- 
merce on the basis of free competition, and any contract, combination, 
or conspiracy, the purpose or direct effect of which is to restrict such 
free competition by way of transportation, or otherwise, is in restraint 
of interstate commerce and unlawful." 

These excerpts sufficiently illustrate the thought that competitive 
conditions are the essential conditions the statute seeks to preserve. 

As urged, the suggestions involved in the data presented by the 
Committee of the Southern Pine Association and the plan presented, 
in nowise trench on this tr&de principle. 

No ruling in any decided case runs counter to the relief here urged. 
The common need of these business men runs parallel with the public 
weal. Will this Commission come to their relief? I am quite sure it 
will if it has the power. 

If the commission, created as it has been, to be an aid to busi- 
ness, finds conditions in the Yellow Pine industry as outlined, can it 
sanction plans for relief ? 

If the Commission should hold that its sole power, touching mat- 
ters here at issue, is to investigate, and can authorize no relief, regard- 
less of its findings, then indeed must these men go forth the victims 
of the nebulous uncertainties of the law. 



44 FEDERAL TRADE COMMISSION HEARING 

It is idle to suggest that they seek relief through their own initia- 
tive, and this without the protecting assurance of the Commission, for 
indeed the ".Rule of Reason," as to be found by some judge or jury, has 
more terrors for them than the unjust burdens they now carry. 

However, it is not possible that this result can follow. 

At an early date, subsequent to the passage of the Sherman Law, 
discussion arose suggesting the need of a Bureau to act as an aid to the 
Department of Justice in the enforcement of the Act. As a result of this 
agitation the Bureau of Corporations was established. Its powers were 
denned as follows : 

"The said Commissioner shall have power and authority to make, 
under the direction and control of the Secretary of Commerce and 
Labor, diligent investigation into the organization, conduct and man- 
agement of the business of any corporation, joint stock company or 
corporate combination engaged in commerce among the several states 
and with foreign nations, excepting common carriers subject to 'An 
Act to regulate commerce' approved February 4th, eighteen hundred 
and eighty-seven, and to gather such information and data as will 
enable the President of the United States to make recommendations 
to Congress for legislation for the regulation of such commerce, and 
to report such data to the President, from time to time, as he shall 
require ; and the information so obtained or as much thereof as the 
President may direct shall be made public. •* * * 

It shall be the province and duty of said bureau, under the direc- 
tion of the Secretary of Commerce and Labor, to gather, compile, pub- 
lish and supply useful information concerning corporations doing 
business within the limits of the United States as shall engage in 
interstate commerce or in commerce between the United States and 
any foreign country, including corporations engaged in insurance, 
and to attend to such other duties as may be hereafter provided by 
law." 

The activity of the Bureau of Corporations was largely inquisitorial, 
and although its work was an aid to the Department of Justice the 
Bureau was of no help to business. On the contrary, its activity tended 
to disturb business rather than be an aid thereto. 

Growing out of this condition the idea developed that a body 
should be created to further the needs of business interests along the 
same lines and of the same general character as the Interstate Com- 
merce Commission. Experience had demonstrated the value of such a 
body to the vexed and complicated problems involved in freight rates and 
other railroad problems. 

The practices of the Commerce Commission, under the power 



L. C. BOYLE 45 

granted it by Congress, are instructive as throwing light on Section 6 
of the Trade Commission Law. 

Section 12 of the Interstate Commerce Commission Act provides 
as follows: 

"That the commission hereby created shall have authority to in- 
quire into the management of the business of all common carriers sub- 
ject to the provisions of this act, and shall keep itself informed as to 
the manner in which the same is conducted, and shall have the right 
to obtain from such common carriers full and complete information 
necessary to enable the commission to perform the duties and carry 
out the objects for which it was created." 

Under this authority, the Commerce Commission has gone forward 
in its administrative capacity, and in an affirmative manner adjusted 
disputes, laid down rules of guidance and freely and openly discussed 
the legality of practices affecting the railroads and shippers. • The whole- 
some and far-reaching results of this wise interpretation of its powers 
are now universally conceded. 

The creation of a Trade Commission was largely influenced by 
the favorable results the country had experienced through the work and 
activities of the Commerce Commission. 

In 1911 the Newlands bill was introduced in the Senate. The bill 
provided for the creation of a commission of the character of the com- 
mission created by the present act. 

In reporting the Newlands bill and recommending it for passage 
the Senate committee in part stated as follows: 

"Suppose that ten out of twenty manufacturing establishments 
heretofore in competition with each other desire to consolidate into 
one enterprise. There ought to be a way in which the men in such 
a venture could submit their plan to the government and an inquiry made 
as to the legality of such a transaction, and if the government was of 
the opinion that competitive conditions would not be substantially im- 
paired, there should be an approval and insofar as the lawfulness of 
the exact thing proposed is concerned, there should be a decision and 
if favorable to the proposal, there should be an end to that particular 
controversy for all time. Such results as these can be obtained in no 
other way than through a Commission, though administrative in its 
character, would, in some instances, exercise quasi judicial functions." 
(Sen. Com. Rep., p. 1.) 

The thought contained in this statement expresses the country's 
understanding of the powers of the Trade Commission as finally created. 



46 FEDERAL TRADE COMMISSION HEARING • 

Section 5 of the Trade Commission Act makes provision for the 
prevention of unfair methods of competition. The power vested is 
stated as follows : 

The Commission is hereby empowered and directed to prevent per- 
sons, partnerships, or corporations, except banks, and common carriers 
subject to the Acts to regulate commerce, from using unfair methods 
of competition in commerce." 

The balance of the section treats of the procedure to enforce the 
general power quoted. 

Section 5 is broad and far-reaching. It gives power, quasi judicial 
as well as administrative. Power to investigate and advise. 

Section 6 commences as f ollows : 

"That the commission shall also have power" — 

Then follows in separate paragraphs a number of subdivisions, each 
denning distinct expressions of power as lodged in the commission. 
We are interested more especially in subdivision (a), which is as 
follows : 

" (a) To gather and compile information concerning, and to investi- 
gate from time to time the organization, business, conduct, practices, and 
management of any corporation engaged in commerce, excepting banks 
and common carriers subject to the Act to regulate commerce, and its 
relation to other corporations and to individuals, associations and part- 
nerships. ' ' 

My contention is that the commission's power to advise as to con- 
ditions in the Yellow Pine industry is found in this quoted paragraph. 

This position is based : 

First. On the evident purpose and history of the legislation. 

Second. In the light of the succeeding paragraphs of Section six — 
and my thought as to this is as follows: 

Subdivision (b) makes definite and complete provision for filing 
reports with the commission. 

Subdivision (c) provides for the commission, on its own initiative, 
or at request of the Attorney General, to investigate and report its 
findings and recommendations. 

(Note power here given to advise with the Department of Justice 
as to course of conduct to be adopted touching the law's enforcement.) 

Subdivision (d) — Commission to act on direction of President or 
Congress on alleged violations of law. 



L. C. BOYLE 47 

(In making such, report it must be conceded that the Commission 
would be justified in making recommendations touching the particular 
needs or condition of the industry thus investigated.) 

Subdivision (e) — On application of Attorney General to make 
recommendations for readjustment of the business of corporations alleged 
to be violating the Anti-Trust Acts in order that such corporations may 
thereafter operate in harmony with law. 

(Here is significant and definite power given by the plain letter 
of the Act. This paragraph was evidently designed to protect those 
conditions, where, through inadvertence, mistake or necessity, the law 
was technically violated. The purpose being to aid, not destroy busi- 
ness. If the plan suggested by the Yellow Pine interests was now in 
operation, and upon investigation it was found to be violative of law, 
under this paragraph, the Commission would have authority to advise 
and aid the industry in readjustment. The thought, of course, being 
to save the industry from unnecessary burdens of litigation and economic 
disturbance. 

The exact converse of this proposition is here presented. If the 
Commission should find that the suggested plan was vital, not only to 
the life of the industry, but also due to public need — could it be argued 
it did not have like power to aid the industry in readjustment?) 

Subdivision (f) provides for publication of the Commission's de- 
cisions. 

(The only affirmative decision the Commission could make would 
be such as would be an aid to business, not alone in advising when law 
was violated, but to guide it in essential matters so as to avoid break- 
ing law.) 

When the assembled purpose of these subdivisions of Section 6 is 
carefully analyzed, the conclusion is inevitable that the power here urged 
is given. 

It will be noted that Section 5 treats of competitive conditions in 
trade and gives the commission the general power to advise and suggest 
to business in reference thereto. Now, Section 6 treats of industry in 
the broadest sense. It is given power to investigate, of its own initiative, 
among other things, the conduct and practices of business organizations. 

Assume, for illustration, that the commission, acting under this 
subdivision (a) of Section six, found that an association of business 
men was indulging in practices, which, in the judgment of the Commis- 
sion, came within the prohibitions of Section one of the Sherman Law, 
could it be argued that under such circumstances, the commission would 



48 FEDERAL TRADE COMMISSION HEARING 

be powerless to advise with these men, to the" end that doubtful condi- 
tions or practices be eliminated ? Such power was the very thought back 
of the legislation. If. the conclusion be reached that the commission 
would have the right to advise with business men under such circum- 
stances, a conclusion the logic of which is unavoidable, then it must 
follow that business men have the right to ask the commission's advice 
in advance, as an aid to trade conditions along lines suggested by the 
data submitted. To reason otherwise, would make subdivision (a) a 
negative, useless provision. The power to investigate without right to 
advise is worse than useless — it disturbs but does not relieve. The 
Bureau of Corporations had that power. 

To give subdivision (a) any intelligible purpose, that interpretation 
must be given that will permit the paragraph to serve a useful end. 
It certainly cannot be earnestly urged that the affirmative powers of 
the commission are to be confined to certain incidents of commerce and 
the broader need, to wit, industrial conditions, be left uncared for: 
To so interpret the commission's powers will not only be a sore disap- 
pointment to the perplexed and confused business men of the country, 
but, as made evident by the facts submitted, will work an irredeemable 
hardship on the whole people. 

The broad purpose of the act was to create a commission that 
might serve the industrial and economic needs of the nation in the same 
helpful way as the Commerce Commission has served transportation, 
and as is being clearly made manifest, the Federal Reserve Board will 
serve the banking interests. 

I cannot better conclude this argument than by quoting the con- 
cluding paragraphs of a brief recently submitted to the Commission 
by S. M. Stroock and Wade H. Ellis : 

"Taking together the recent acts, the reports of the Congressional 
committees, public utterances of administration officials, and early 
attempt at Trade Commission legislation, the conclusion is plain that 
the Trade Commission is intended to be an administrative board. The 
uncertainties attendant upon the enforcement of the Sherman Anti- 
Trust Law with its resultant risks of prosecutions and generally re- 
strictive operation have led to the establishment of this Commission for 
the purpose of encouraging men engaged in business to come before 
it and to freely consult members of the Board and to ask their advice 
in proper cases. The full extent of this advisory power is not certain 
and is not precisely measured in the law. But the whole contempo- 
raneous history of the passage of the Trade Commission Act estab- 
lishes beyond question that its primary object was to afford to business 



L. 0. BOYLE 49 

men the opportunity to know in advance whether or not some con- 
templated business venture or some trade practice is going to be ap- 
proved or disapproved. It was the intention of the framers of this law 
that men should no longer jeopardize their personal liberty and incur 
the risk of disgrace in order to determine whether or not some par- 
ticular investment of money is lawful or unlawful. 

The declaration of the President of the United States that the 
business men 

'Desire the advice, the definite guidance and information which 
can be supplied by an administrative body, an Interstate Trade Com- 
mission, ' 

can mean nothing else than that the legislative policy sought by the 
President to be enacted into law contemplated the fullest opportunity 
for consultation and conference with the Trade Commission as to 
prospective business arrangements. 

The following propositions seem clear : 

First. The history of this legislation, both preceding its enactment 
and contemporaneous with it, shows that Congress, the President and 
the country desired and expected that the Federal Trade Commission 
would co-operate with business men in adjusting large affairs of inter- 
state commerce to the law, and would so consult and advise with them 
as to avoid the endless lawsuits which theretofore had been the result of 
anti-trust statutes. 

Second. A strict construction of the Clayton and Covington laws, 
as finally enacted, may not in specific terms require the Federal Trade 
Commission to make investigations and orders for the guidance of 
business men in advance of a complaint; but 

(a) Whatever the requirement of the law may be, it is clear that 
there is nothing in the language of the statutes inconsistent with the 
exercise of the power here suggested. 

(b) It is clear beyond all doubt that the Federal Commission 
may, in the exercise of its discretion, under the authority to investigate 
and make rules and regulations, consider proposed plans for the ad- 
justment of relations between corporations engaged in interstate com- 
merce and make administrative rulings based on the facts ascertained, 
which will be useful for the guidance of such corporations and all 
others whose situation may be similar. This is in conformity with the 
powers now exercised by the Interstate Commerce Commission where no 
greater or different ground of authority appears ; it is consistent with 
the attitude of the Federal Reserve Board; and more than all else it 
responds fairly to the purpose of the statute, the expectations of the 
country, and a good, wholesome public policy. ' ' 

A great and vital industry needs help. The business men engaged 
in it come to this Commission for guidance. To deny them this help 



50 FEDERAL TRADE COMMISSION HEARING 

will indeed defeat the basic thought of the nation back of the act 
creating the Commission. 

Mr. Downman: Next, with your permission, I will introduce Mr. 
C. I. Millard, of Norfolk, Virginia, representing the North Carolina 
Pine Association. 



STATEMENT OF MR. C. I. MILLARD 

Mr. Millard: The conditions in North Carolina, Virginia and 
South Carolina are practically in the same situation that has been 
illustrated by Mr. Keith in his admirable presentation. I could not 
add anything to it. I only will say that I endorse everything he 
said about the lumber industry. 

There are some conditions in the forests of the East Coast that 
are a little different than in any other section, because we are really 
working on regrown timber. Commencing at the James River, going 
south, that whole territory was practically a longleaf pine belt at 
one time. It has all been destroyed by the turpentine or naval stores 
industry, and the second growth pine that grew up, called the old- 
leaf pine, Rosemary pine, short-leaf pine or North Carolina pine, took 
the place of the long-leaf, brought about from various causes. There- 
fore, the industry in the North Carolina belt is based upon the utiliza- 
tion of timber which has been reproduced, not by design or intent 
as much as by the force of circumstances brought on by the war 
and the disaster that followed it, and because of the fact that the 
pine grows very rapidly in that country. The fires have been the 
greatest destructive force. There has been more timber burned there, 
I presume, than has been cut. 

Therefore, we are dealing with a situation that would follow 
in a close relation, at least, should the present manufacturers of lum- 
ber be enabled to reproduce their lumber by growth, which would 
be a highly desirable thing and a great economical gain to the coun- 
try. However, it would be impossible to carry on any system of 
reforestation or conservative method of lumbering which would re- 
sult in the second growth or the return of the stumpage value to 
the land under the present conditions of the industry. We are sell- 
ing Lumber below the cost of production, which is an individual loss 
to the industry or the members of the industry. But to sell it below 



C. I. MILLARD 51 

the cost of reproduction is a great economic crime to the public, be- 
cause there must come a time, as every one must recognize, when the 
supply of timber in this country will be at the vanishing point, and 
unless it can be reproduced by means of capitalists who can afford 
to do so, the end will be disastrous. 

The lumber business and the coal industry and the producers 
of phosphate rock and perhaps some other great natural resources 
can be considered together. They cannot be reproduced unless the 
present value of material will yield not only a return on the invest- 
ment and the cost of the manufacture, but also provide some equi- 
table means for the conservation of the resources. It might be a far- 
fetched simile to say that in the lumber business the great improve- 
ment is not to be considered as a development compared to the Panama 
Canal, but the situation seems to be reversed. The Panama Canal 
or any other great public benefit is provided for by means of the 
sale of bonds that the future generations are supposed to pay, and 
our situation is entirely reversed. There is no possible chance for 
the future generations to use any lumber that can be reproduced at 
the present time unless the public of the present time would reverse 
the bond issue principle and pay for it now. 

Now the situation in North Carolina is complicated by competi- 
tion from all sources. Lumber is the only great commodity that 
is sold by measure and carried by weight, and that brings about the 
need and necessity of a delivered price, so that a delivered price 
at any point can be readily ascertained, and thus the active means 
of competition comes with any merchant. He does not know what the 
freight rate is from any point, he can always get a delivered price 
instantly, so that the forces of competition are actively and con- 
stantly at work, so that we meet not only the competition of every 
lumberman but we meet the competition of the government, espe- 
cially of Canada and now of the United States, inasmuch as they 
supply timber which has only to be paid for when cut, so that the 
United States government and the Canadian government are direct 
competitors of every manufacturer. 

The Chairman: In what way? 

Mr. Millard: They are selling their timber under contract to be 
paid for as cut, and if it burns, the government bears the loss. In 
other words, a manufacturer who has one of those tracts does not 
have to provide the source of supply or raw material for a long 
period of years. And that is one peculiar condition of the lumber- 



52 FEDERAL TRADE COMMISSION HEARING 

man, lie must have a supply of raw material for an extended period, 
and he must keep all his machinery and mills and so forth in the 
highest state of efficiency until the last log is sawed, and then it is 
junked. 

We meet not only the competition of the various lumbermen, but 
also meet all sorts of substitutes, And that is particularly so in 
North Carolina pine, inasmuch as a great percentage of that lumber 
is used in the manufacture of boxes and shipping cases, and the box 
makers have dominated that market for forty years, and their com- 
petition has been very keenly felt, inasmuch as they now meet the de- 
mand of people for lighter shipping cases with fiber box and fiber 
package material, and all goods are shipped in cartons now. That 
has made a very serious inroad into the demand for lumber. 

The percentage of good lumber that is produced out of the 
original growth or the earlier growth timber was very much higher 
than it is at present, and that has brought about a situation, which, 
strange as it may seem, we are getting today less value per thou- 
sand for the average mill cut than was realized in the 80 's. 

The costs of production have increased very much, the principal 
item being the cost of extending the railroads into the timber. The 
more railroads we build, the more are to be kept up and maintenance 
charges are higher. The cost of hauling a long distance is very much 
greater. That has brought about an increased cost of production 
and a reduction in price. These extra costs have also tended to un- 
scientific methods of merchandising and manufacturing. We ought 
to be able to utilize a great deal of the raw product that Ave do not. 
We have to leave a great deal in the woods, and we can do nothing 
with the by-products. Theoretically there could be paper made out 
of the pulp, and theoretically timber that is not good enough for 
saw mill purposes should be used for firewood and used for the manu- 
facture of fiber to make cases, and in the long-leaf belt the trunks 
and limbs should -be used in the manufacture of naval stores by what 
may be called the synthetic process. But the facts are that all of 
those ancillary processes require a great deal of study and a great 
deal of capital, and under present conditions it is impossible to obtain 
it. The value received from the manufacture of lumber does not 
enable the manufacturer to undertake any other business or the pro- 
duction of any other by-products. 

The Chairman: Is that the reason why it is not done, the fact 
that they are not making any money on their timber? 



C. I. MILLARD 53 

Mr. Millard: That is the difficulty, not obtaining capital, and 
also just at the present time the naval stores industry is in a desperate 
condition. No one could attempt to compete with gum spirits at 
present by a synthetic process. 

The Chairman : What is the condition of the industry in the arts, 
with reference to those by-products, have they been developed to any 
extent f 

Mr. Millard: Yes, some of the higher grades of the rosin have 
been used in the arts as the basis of paint and varnish, and almost 
every manufacturer in some portion of his process uses some of the 
naval stores. The paint manufacturer is the greatest, and soap manu- 
facturers use an enormous quantity of rosin too. 

Of the mills that are listed in this particular belt, the census 
figures are the best that can be furnished. There are something like 
4,000 mills, of which the great majority are small plants. We never 
have been able to obtain any statistical information from them. There 
are supposed to be about 46 billion feet of timber in that belt. The 
annual production for the past five years is something in excess of 
3 billions. The excess in cut over shipments has been running for the 
last four years about thirty to thirty-five million a year. The average 
cost of logging and manufacturing and marketing it is impossible 
to obtain in any such accurate figures as Mr. Keith has presented, but 
the statement which has been prepared for me shows $12.80, but it 
unfortunately does not say whether that includes depreciation or in- 
terest or whether it is on lumber measure or log scale. The average 
mill price, exclusive of stumpage, will probably run about $15 to 
$15.50 for that time. I would like the privilege of reviewing these 
figures and submitting such data as can be secured, and will submit 
it to you at Washington. 

The Chairman: We would be very glad to have you do that in 
any such form as you desire to place it. 

Mr. Millard: Have you any questions, gentlemen? 

Commissioner Hurley: What competition do you meet with from 
Canada or Nova Scotia? 

Mr. Millard: Spruce and white pine and low grade hardwood. 

Commissioner Hurley: Is it very keen competition? 

Mr. Millard: Right now the competition is largely in New Eng- 
land. Spruce lumber is constantly marketed in New York City, but 
there is a great deal of hemlock coming now. The box makers still 
buy large quantities of Canadian white pine. Many factories con- 



54 FEDERAL TRADE COMMISSION HEARING 

timie to specify white pine for boxes, because they think it does not 
give an odor, and is lighter. 

Commissioner Hurley: Do you export lumber? 

Mr. Millard : Before the War we did ; about all the good lumber 
that was manufactured was exported. There is absolutely no market 
there now, however. 

I cannot see any solution, gentlemen, for this problem in our 
district at present, except to place some reasonable restriction upon 
the production, and to have it put upon some fairly reasonable and 
co-operative sales agency basis. 

Commissioner Parry: And, of course, the sales basis would apply 
for domestic as well as foreign trade? 

Mr. Millard: Yes, sir, especially in the foreign trade. 

Commissioner Parry: Do you favor such a plan as that sug- 
gested by Mr. Keith? 

Mr. Millard: Yes, very strongly. I did not know he was going 
to suggest it. 

Commissioner Parry: For your district? 

Mr. Millard: Yes, sir. If we could regulate the production of 
the lumber that can be marketed, it would be a long step towards 
the solution of the problem. But, it is not only that we are forced 
to market it at any price we can get, but because of the further rea- 
son that we cannot hold it. A great number of saw mills down there 
are right on the water and they have no lumber yards, and their 
lumber must be shipped out on vessels as soon as it is made. Fur- 
thermore, our lumber will not stand in the air long. We have a 
very large percentage of sap lumber. It is impossible to get any- 
thing like a fair salvage, if there is a stain or a check or any other 
weather effect, anything produced by the weather, because that re- 
duces the grade to a very low value. The difference, for instance, 
between good boards and poor boards is about $20.00 a thousand. 

The Chairman: Mr. Keith, I wanted to ask you what were your 
principal foreign markets for Southern pine? 

Mr. Keith: We do not export anything directly ourselves. 
Southern pine reaches its markets principally on the Continent, and 
in England and South America, Buenos Ayres, and down that way. 

The Chairman: What are the methods employed for the market- 
ing of Southern pine in South America? 

Mr. Keith: Speaking for ourselves, we generally sell our lum- 
ber through Price & Pierce of London, what little we sell. 



C. I. MILLARD 55 

The Chairman: Who are Price & Pierce? 

Mr. Keith: They are large lumber factors in London. 

The Chairman: Lumber factors? 

Mr. Keith: Yes, sir, in London, England. We sell to them and 
they move it to South American markets. They have their own agen- 
cies in South America. 

The Chairman: What is the connection as to the European mar- 
kets? 

Mr. Keith: Our business before the War was off just about 50 
per cent; and then when the War was declared, it went off the other 
50 per cent. We have had practically no export business since the 
24th day of last July, when the War first started. 

The Chairman: What effect do you think the closing of the 
War is going to have, so far as increased consumption is concerned? 

Mr. Keith: I think we are going to have so much business that 
we won't know what to do Avith it, and I think further, that for 
the foreign markets, it is going to be low grade lumber. 

Commissioner Hurley: What is the per cent of foreign business 
that is done, as compared with the total? 

Mr. Keith: About 12 per cent. 

Commissioner Hurley: What is your competition, Norway lum- 
ber? 

Mr. Keith: On our low grade lumber it is Norway. I am not 
as familiar with that export market as I would like to be, gentle- 
men, because I have not paid any attention to it except in a very 
small way. 

Commissioner Hurley : Is there any one here representing the 
Southern pine industry who is familiar with the export trade? 

Mr. Keith: I think John Henry Kirby is pretty Avell posted 
on it. 

Commissioner Hurley: I would like to hear from him later on. 

Commissioner Parry: Mr. Jones can arrange for that. 

Mr. Keith: Yes. 

The Chairman: Yes, any one who is familiar with the methods 
employed in marketing American lumber in foreign countries. 

Mr. Downman: Mr. Chairman, we made a strenuous endeavor to 
have the lumbermen here generally, outside of this committee that was 
chosen to present the concrete facts, but most of them are still scared. 

The Chairman: I think you have done very well, Mr. Down- 
man; you have done very well, indeed, and it has been very helpful. 



56 FEDERAL TRADE COMMISSION HEARING 

Mr. Downman: Do you wish to proceed further this morning, 
Mr. Chairman? 

The Chairman: No, we will resume at 2:30. We will adjourn 
until then. 

(Whereupon, at 12:45 o'clock, P. M., a recess was taken until 
2:30 o'clock, P. M.) 



SECOND SESSION 

MONDAY AFTERNOON, JULY 19, 1915 

The Chairman: We will now resume, gentlemen. Any one de- 
siring stenographic minutes of the proceedings here may obtain them 
by applying to one of the stenographers, at the rate fixed by the 
Commission. 

Mr. Downman : Mr. Chairman and gentlemen of the Commission : 
Mr. Toole of Missoula, Montana, who was to be here as the repre- 
sentative of the Western Pine Manufacturers Association, is quite 
seriously ill and could not get here. It was particularly important, 
to my mind, that he should have been here to have answered one 
of the questions that was asked of Mr. Keith this morning, and that 
is to what extent the government holdings of timber, which are prin- 
cipally in the west, have suffered on account of the conditions that 
prevail in the lumber industry today, and as he is operating imme- 
diately in the section where the government owns timber all around 
it, I think probably he could have answered definitely that question. 
But I think that the Commission can develop that testimony here 
from the gentlemen who represent the Forestry Department. They 
are in close touch with it, and I understand Mr. Greeley and Mr. 
Butler are here, and one other gentleman that you mentioned, I be- 
lieve, this morning. They are thoroughly familiar with it and can 
give you the information that you request. 

I sincerely hope that the Commission, one and all of you will 
try and bring out, if the gentlemen who represent the lumber industry 
are lame, blind and halt, what is in your minds. Their idea is to be 
frank, full and explicit with you, but I do not think some of them 
know just how to express themselves. So worm it out of them, and 
if necessary, we will send down and get a corkscrew for you to use. 

The National Lumber Manufacturers Association has been organ- 
ized for some twelve or thirteen years. Up to, I think it was, 1910, 
we did not publish a year book of the proceedings of the National 
Association, but since that time we have. I have had sent here 
by the Secretary of the Association, a full bound set of those pro- 

57 



58 FEDERAL TRADE COMMISSION HEARING 

ceedings, and we believe that it has some very valuable information 
in it, and we would like to tender that for the use of your library, 
so far as the lumber industry is concerned. 

The Chairman: We would be very glad to have them. 

Mr. Downman: The next representative of the lumber industry 
is Captain E. A. Selfridge, Jr., of Willits, California, President of the 
California Redwood Association. 



STATEMENT OF MR. E. A. SELFRIDGE, JR. 

Mr. Selfridge: Gentlemen, unfortunately, owing to lack of time 
and knowledge of just what information was required, it has been 
impossible for the Redwood Association to compile satisfactory and 
complete data for presentation to you at this conference. Data are 
now being compiled, complete, we hope, in every respect, both as 
to foreign and domestic commerce, for presentation to you at San 
Francisco during your meeting here. That will cover both foreign 
and domestic commerce. 

I merely desire to say at this time that our output represents 
approximately 60 per cent of our potential capacity only. 

The Chairman: The consumption in this country? 

Mr. Selfridge : Well, the total consumption. I cannot say what 
portion of that represents domestic and foreign. 

The Chairman: Both foreign and domestic? 

Mr. Selfridge: Both foreign and domestic. 

The Chairman: I understood you to say about 60 per cent of 
your capacity. 

Mr. Selfridge: Of our potential capacity. 

Commissioner Parry: Of the mill capacity? 

Mr. Selfridge : That is of the potential capacity ; if all the mills 
were running at full time and to full capacity. The conditions with 
us are extremely unsatisfactory. The foreign trade is a very impor- 
tant factor in our business, and there is a foreign export depart- 
ment which has complete information regarding that, and will sub- 
mit it to you in full detail at that time. 

Mr. Selfridge: Could you gentlemen give me any idea approxi- 
mately when you will moot in San Francisco? 

Commissioner Parry: Say about the 20th of August. 

Mr. Selfridge: The 20th of August? 



E. A. SELFRIDGE, JR. 59 

Commissioner Parry: Yes. San Francisco will be a satisfac- 
tory meeting place for you? 

Mr. Selfridge: For the Redwood people, yes; very satisfactory 
indeed. 

The Chairman: We will be very glad to have you present your 
subject matter there. 

Mr. Selfridge: It will be fully presented at that time. 

Commissioner Parry: Your association covers all of the Redwood 
manufacturers in California? 

Mr. Self ridge: Practically all. 

Commissioner Parry: Mendocino County — 

Mr. Selfridge: Mendocino, Humboldt and Del Norte counties. 

Commissioner Parry: Is your association confined to those three 
counties? 

Mr. Selfridge: There really is no association. There is no organi- 
zation and no president and no records are kept. I am simply here 
representing the Redwood manufacturers rather than an association. 

Commissioner Parry: But you are representing the manufac- 
turers of those three counties? 

Mr. Selfridge: Of those three counties, yes, sir. 

Commissioner Parry: There are other counties producing red- 
wood? 

Mr. Selfridge: There is some timber in Santa Cruz, and some 
timber in San Mateo county, but very little of it is being operated 
at this time. 

Commissioner Parry: Then we will expect you to make a presen- 
tation about August 20th, and we will communicate with you later 
as to the dates. 

Mr. Seifridge: Thank you, gentlemen. 

The Chairman: I understand that there has been some legisla- 
tion passed in California, exempting agricultural and certain other sim- 
ilar associations from the application of the local anti-trust laws. I have 
heard something to the effect that the lumbermen have sought to 
come within those exemptions. I do not know what the facts are, 
but I would like to get them, and when you prepare that data 
I wish you would look into that so that you would be prepared to 
give us data on that, also. 

Mr. Selfridge: I will be very glad to, indeed. 

Mr. Downman: Captain Selfridge has just suggested the absence 
of a very prominent lumberman on the Pacific Coast, Mr. George X. 



60 FEDERAL TRADE COMMISSION HEARING 

Wendling, who represents another line of industry, and who was on 
his way here, and was taken ill on his way on the train, and is still 
ill in Salt Lake City. I should like to have the Commission take 
Mr. Wendling 's name and make it a point to have Mr. Wendling 
appear before them at the San Francisco hearing. 

The Chairman: Could you make arrangements with Mr. Sel- 
fridge to have Mr. Wendling there? 

Mr. Downman: Yes, I should be very glad to do that. 

The Chairman: Mr. Jones, will you please make a note of the 
name? 

Mr. Selfridge: George X. Wendling. 

Mr. Downman: The next gentleman on the list is Mr. George 
E. Watson, New Orleans, Secretary of the Southern Cypress Manu- 
facturers Association. 



STATEMENT OF MR. GEORGE E. WATSON, SECRETARY, 
SOUTHERN CYPRESS MANUFACTURERS' ASSOCIATION 

Mr. Watson: Gentlemen, I arrived in Chicago totally unpre- 
pared, not knowing exactly the information which was to be called 
for by this Commission, but I have a few remarks here. 

In presenting a report of the trend of the cypress lumber industry 
for the past several years, consideration must be given to a number of 
■factors which have exerted but a minor influence in other woods, the 
leading two of Avhich have been the tremendous increase in the produc- 
tion and the rapidly changing market for the products of the cypress 
sawmills. 

To quote figures from those submitted by the U. S. Forest Service. 
compiled in co-operation with the Bureau of Census, we find a total 
cypress production during 1899 of 495,836,000 feet. During 1908 it 
was 743,297,000 feet. During 1913 (being the latest figures available) 
it was 1,097,247,000 feet, This gives an increase in production during 
the period of 1908 to 1913, inclusive, of about forty-seven per cent. 

Beginning during 1907 or 1908, a decline in the sales of cypress 
to factories (largely sash, door and blind factories) set in, these fac- 
tories finding it possible to buy other lumber which would suit their 
requirements a1 much lower prices. An impending condition of under 
consumption became very apparent, and as there was no legal method 



GEORGE E. WATSON 61 

available of decreasing the production, demoralization was threatened. 
At about this time, however, it occurred to the manufacturers that there 
would be a market for cypress through distributing dealers provided 
there was an incentive for the dealers to put cypress in stock, this in- 
centive to be produced by creating what might be called a ready-made 
market, or educating the consuming public in such a way that it would 
demand cypress for those uses for which cypress is adapted. 

Thus began the cypress advertising campaign, which advertising 
was addressed to home builders and the actual consumers of lumber, the 
effort being to create a desire for cypress and to cause an increasing 
sale of cypress through retail lumber yards. This campaign of adver- 
tising has been continuously and consistently followed by the cypress 
manufacturers with the result that this wood has probably suffered 
smaller decline in volume of business and in prices than have other 
woods. It must be admitted in all candor, however, that some of the 
trade now going to cypress would have gone to other woods had the 
public not been thus educated, although cypress must take some slight 
credit for having done creative work, in that in a great many instances 
the use of lumber was incited. 

The latest available figures as to stock conditions (meaning unsold 
lumber on hand) give the condition as of January 1, 1915, and it will 
be at least another thirty days before the statistics showing stock on 
hand as of July 1, 1915, are available. These later figures can at that 
time be submitted to the commission if desired. The condition as of 
January 1, 1915, is a comparison with the preceding year at the same 
twenty-nine mills, and they show that the stock of cypress lumber had 
increased during the year 1914 almost exactly 4%. The stock on hand 
at these 29 mills January 1, 1914, was 448,926,172 feet, and on January 
1, 1915, it was 467,038,889 feet. 

During the first six months of 1915, it is known that stocks of 
cypress lumber have increased, but the exact percentage of this increase, 
as already stated, is not known. It is believed that the 1915 produc- 
tion of cypress will show a gain over the year 1914, but these figures 
also are not available, this opinion being expressed merely through 
knowledge of new sawmills which are beginning operations this year. 

No figures have been prepared indicating logging and operating 
costs, but it will be possible to compile these figures and submit same 
to the commission if desired. 

The Chairman: Mr. Watson, have you any foreign market for 
cypress ? 



62 FEDERAL TRADE COMMISSION HEARING 

Mr. Watson: Very little. There has been some gain, or had 
been up to last year, some slight gain in the foreign trade. There is 
some slight amount of stock goes to Ireland for use among the linen 
mills, and there is some little goes to South America. Other than that, 
the foreign market is very small. 

The Chairman: Do you find any competition from outside of 
this country with cypress? 

Mr. Watson: Other woods? 

The Chairman : In the domestic market. 

Mr. Watson: No. 

The Chairman: No foreign cypress or foreign woods come in 
to compete with it? 

Mr. Watson: Not to compete with cypress, no. 

Commissioner Hurley: In this increase of cypress, do you find 
it chiefly on the farms, in silos and tanks? 

Mr. Watson: The increased consumption of cypress, do you 
mean ? 

Commissioner Hurley: Yes. 

Mr. Watson: Yes, we find it scattered throughout the whole 
country. 

Commissioner Hurley: Is it noticeable in any particular line? 

Mr. Watson: In building lines, actual home construction, and the 
use by individuals. Our trade was formerly largely with factories, 
sash, door and blind factories, and such establishments. 

Commissioner Parry : How is this advertising carried on, by your 
Association or by individuals? 

Mr. Watson: By the Association, in the name of the Associa- 
tion, i 

Commissioner Parry: Are the expenses pro rated? 
Mr. Watson: The expenses are pro rated on a thousand foot 
basis, according to the production of the saw mills. 

The Chairman: You said that you had twenty-nine mills in the 
Association, did I understand? 

Mr. Watson: Twenty-nine mills in that comparative statement. 
The figures were not available from other mills. 

The Chairman: What proportion of the total production of cy- 
press is interested in your Association? 

Mr. Watson: Slightly more than half; that is, on the latest 
figures available from the Government as to the production. We have 



JOHN H. KIRBY 63 

550,000,000 to 600,000,000 feet, probably, produced by Association 
mills. 

Commissioner Hurley: As to this advertising campaign that yon 
have in your association, the other independent manufacturers profit 
by the advertisements also? 

Mr. Watson: Yes. 

Commissioner Hurley: But they do not contribute to it, do 
they? 

Mr. Watson: No. 

Mr. Downman: Mr. Chairman, you requested that we have Mr. 
Kirby to explain, as far as he could, the question propounded to 
Mr. Keith, in regard to the export business on yellow pine, he being 
probably the most familiar with that part of the business. 

Mr. Kirby, will you come forward? Gentlemen, this is Mr. John 
H. Kirby, of Houston, Texas. 

Mr. Kirby, Mr. Keith said you probably knew a little more about 
the export business than he did, and if you will, explain it to the 
Commission. 



STATEMENT OF MR. JOHN H. KIRBY 

Mr. Kirby: I do not know just what points the inquiry should 
cover. 

The Chairman; Mr. Keith developed this morning the conditions 
surrounding the industry, as he knew them, and their difficulties and 
embarrassments, and troubles, and Ave asked for information with 
reference to the foreign markets, what the foreign markets con- 
sisted of, and conditions generally appertaining to the disposition of 
this particular kind of lumber abroad, either in South America, or 
in Europe, and also the kinds of competition that you met in for- 
eign markets, if you met any. In a general way, what the conditions 
in the foreign markets were as affecting your problem. I think that 
covers it. 

Mr. Kirby: Yes. There is very sharp competition, Mr. Chair- 
man, in the foreign markets. We Americans have been of the opinion 
that our failure to compete, even before the War, set in, arose largely 
out of political conditions or legal conditions. We have been for- 
bidden to get together and form large concerns for the purpose of 



64 FEDERAL TRADE COMMISSION HEARING 

handling foreign trade, just as we have been forbidden to get to- 
gether in the domestic trade, whereas our competitors, especially in 
the British Colonies, have not been so handicapped, and they have 
been able to take away from us in times past, speaking now entirely 
for the Yellow Pine people, the trade in foreign countries, in South 
America and in Europe, because of the fact that they could form 
larger organizations. 

The Chairman: Selling organizations? 

Mr. Kirby: Selling organizations, to take care of the foreign 
business. And as a result, they have held that foreign business against 
us to a very large extent. "We have not the trade in South America 
that we ought to have, in Brazil, Argentine, Columbia and even in 
Central America. Our Canadian competitors have taken it away from 
us to a certain extent. 

We had some, of course, prior to the European War, a consid- 
erable trade in Europe, old, settled countries like that, where they 
were accustomed to our wood, and of course, nobody has what we 
think is just as good as yellow pine, where they have tried it out, 
and we have been able to introduce it. That trade, of course, is lost 
to us under present conditions. 

I do not understand just the scope of this inquiry before this 
Commission, and I do not know just what is proposed to be done 
for the relief of the lumber trade of America, and especially the yel- 
low pine trade, in which I am interested. But I do know, that even 
in our neighboring sections of the West Indies, we have not been 
able to maintain ourselves, because none of us are large enough to 
take care of the trade in a substantial way, and the law forbids us 
having any understanding with our neighbors in the way of selling 
agencies, or anything of that sort, for the purpose of going after 
that trade. I do not know whether that is the scope of the inquiry 
you desire me to testify about. 

Commissioner Rublee: You said you had been prohibited from 
forming associations for the purpose of the foreign trade? 

Mr. Kirby: Yes. 

Commissioner Rublee: Will you explain in what way you were 
prohibited? 

Mr. Kirby: We understand that any agreement that could be 
construed to be in restraint of trade, applies as much to foreign trade 
as it does to domestic trade, and we understand further, that 
we are forbidden to organize anything like a selling agency in this 



JOHN H. KIRBY 65 

country for the purpose of handling the domestic trade, and that 
the same law applies to us in so far as the foreign trade is concerned. 

Commissioner Rublee: What is the basis of your understanding? 

Mr. Kirby: The Sherman Anti-Trust law. 

Commissioner Rublee: Is this just merely your construction of 
the Sherman Anti-Trust law. 

Mr. Kirby: What our lawyers tell us are our rights under it. 
I do not know that any lawyer understands it. 

Commissioner Rublee: I was just trying to get at that point. 
So far as I know there has been no decision of the courts affecting 
that question. 

Mr. Kirby: I do not think any yellow pine man has been guilty, 
so you could have a decision bearing directly on the question. 

Commissioner Rublee: I just wanted to know what the ground 
of your opinion was. 

Mr. Kirby: That is it. We understood it was forbidden. 

The Chairman: And you were taking no chances ? 

Mr. Kirby: We were taking no chances. We are a law-abiding 
set, if Ave know ourselves. 

Commissioner Hurley: Do you believe it would be helpful to 
the lumber industry if the lumber manufacturers could get together 
and form a co-operative selling plan, and go after the foreign business ? 

Mr. Kirby: I do, and we would be on the same basis then with 
our competitiors, especially our British Possessions' competitiors, who 
have no such handicap, as I understand it. And they form these or- 
ganizations for the purpose of handling foreign trade. They even go 
so far as to provide bottoms to carry their product in. 

Mr. Hurley: Do they get a better price? Do Canadians get a 
better price than we get for our lumber? 

Mr. Kirby: I assume they do, as we do not get any of the busi- 
ness when we do figure a schedule for foreign delivery. I do not 
know what they get. There is more than the price involved, be- 
cause it is the transportation cost of getting it there, and of course 
no one concern over here is able to control the bottoms necessary 
to supply this trade. I really do not know, though, the relative prices 
of what they get or what we get. I know that they enjoy the trade, 
but I think it is more largely a transportation question than other- 
wise, because we are not able to figure closely, because no one man 
is able to command the transportation. 

Commissioner Hurley : Where are your markets for your lumber ? 



66 FEDERAL TRADE COMMISSION HEARING 

Mr. Kirby: Largely in the United States. 

Commissioner Hurley: You mean in the Central West? 

Mr. Kirby: No, my product goes into thirty states. I am one 
of the larger ones of the yellow pine manufacturers. We have some 
fourteen mills and make something like four hundred million feet 
a year, and our market is all the way from the Gulf to the Lakes, 
and from the Rockies to the Atlantic. We sell largely in New York 
and the New York district, and we do in the Mississippi Valley down 
here. And to give away a family secret, I have just received my 
annual statement for last year, and we lacked something more than 
$200,000 of earning one postage stamp on last year's business, cover- 
ing something like 400,000,000 feet of lumber. 

The Chairman: You doubtless have given a good deal of thought 
recently to this proposition of combination or co-operation in a com- 
mon selling agency for foreign markets in the lumber industry. What 
do you think, what would be your judgment, as to whether such a 
co-operative agency for the purpose of promoting your sales in foreign 
fields would have any effect upon local prices; in other words, is it 
possible to get the advantages of co-operation to the extent of your 
markets in foreign fields without permitting a combination which 
would affect prices and hurt the consuming public in this country? 

Mr. Kirby: I think so. If we could organize a selling agency 
that would take care even of our surplus, it would maintain our home 
market without any necessary boost to that home market, but would 
prevent demoralization such as exists now, with something like 17,000 
competitors at each other's throats all the time, when there is an 
over-production or an under-consumption, whichever it may be. 
There need not necessarily be any relation between the foreign price 
and the domestic price. 

The Chairman: Do you think there would be, as a matter of 
practical effect? 

Mr. Kirby: Well, I doubt if there would be. They are entirely 
new fields, and they do not find out about each other. The market 
in America is practically the same thing everywhere, because they all 
know the prevailing market, and it is largely today what the buyer 
is willing to pay, because there are so many willing to sell, that he 
fixes the price largely at the present time. If we could form an asso- 
ciation or co-operative organization of that kind for the purpose 
of tajring care of the foreign trade, it might be three or four dollars 
a thousand better than the domestic trade, because not all of us 



JOHN H. KIRBY 67 

are so situated that we can reach the ports on a competitive basis. 
There are many interior mills like Arkansas, for instance, where there 
would be a differential against them in the freight rate reaching 
the port. But it would take out of the domestic trade to the extent 
of the consumption abroad of the product, the coast mills, make that 
is marketable abroad. There are a great many things where the mar- 
ket is peculiarly in this country, but of their grades, which are mar- 
ketable abroad, it would take them out of the domestic market, and 
of course, they would sell for more money abroad, or they would 
not go abroad. That goes without saying. 

The Chairman: What is your chief handicap abroad now? Is it 
your inability to exploit the markets? 

Mr. Kirby: That is largely it. 

The Chairman: Or is it lack of ability to meet prices, or quality, 
or quantity? 

Mr. Kirby: It is inability to meet the market, because none of 
us are powerful enough financially to contract for the bottoms. None 
of us have the stock behind us to supply the demand. "We have got 
to have co-operation or else we cannot supply the trade and cannot 
make large contracts abroad. None of us, or perhaps no two or three 
of us are big enough to supply that demand and meet our contracts. 
We would have to take in a large number of manufacturers having 
the capacity to supply the contracts, and that of itsejf would be 
effective in attracting to us the bottoms, whether we bought them, 
or hired them, or whatsoever. Bottoms right now are scarce, but 
ordinarily they seek the tonnage. 

The Chairman: You spoke of the extension of the Canadian 
markets to the foreign trade. I am rather interested because the 
Canadian policy with reference to competition is practically the same 
as our policy; the policy of Canada is opposed to monopolies and the 
policy of the United States is opposed to monopolies. 

I am rather interested, therefore, as to the facts, if you happen 
to have them at hand, as to what the Canadian manufacturers do to 
extend their foreign trade. 

Mr. Kirby: I understand the Canadians, of course, are bound 
by common law just as we had it in this country before we assumed 
to repeal it or regulate it by statute, and that monopoly is opposed 
to the common law, and that there is a remedy. 

The Chairman: The Canadian combinations act reiterates that 
too? 



68 FEDERAL TRADE COMMISSION HEARING 

Mr. Kirby: Yes, but nevertheless the fact is this, that they have 
the right or they exercise the right of doing those things that are 
necessary for the protection of their enterprises and their industries. 

I take it as the American thought on that subject that we have 
that right or ought to have that right, and yet there is a statute star- 
ing us in the face that forbids us making anything in the nature of 
an agreement in restraint of trade, and up to this time there has 
been no tribunal, unless this body is so empowered, to tell us what 
may be and what may not be obnoxious to the law and therefore in 
restraint of trade. 

Now, I understand it to be a fact that Canadian lumbermen can 
get together in scores, or tens of scores, and say that dimension of 
a certain quality is worth so much money under the law of supply 
and demand at the present time ; and when they gather their sta- 
tistics that that is the price that they make under an open agreement 
that that is the price, but no such thing as that can occur in this 
country. 

The Chairman: Do you know that to be the fact? 

Mr. Kirby: I understand it to be so. I have not been among 
them, but well informed men in my line have been present at their 
meetings, and they tell me that that is the fact. For instance, men 
like A. L. Clark, of Dallas, Texas, who owns a mill in Vancouver or 
in that vicinity in British Columbia. 

The Chairman: Would you be kind enough to investigate that 
and verify some of these facts and give us the benefit of it by writing 
to us? 

Mr. Kirby: I will be glad to do it. 

The Chairman: It is a very interesting matter and is rather 
illuminating as to Canadian policy. 

Mr. Kirby: I understand that to be the fact and I shall take 
pleasure in running it down. 

The Chairman: I wish you would. 

Mr. Kirby : I have not heard it questioned. 

The Chairman: Are you familiar with any co-operative organi- 
zations that they have, which are actively engaged now in foreign 
trade? 

Mr. Kirby: Well, no, not to say familiar with it. 

The Chairman: The names of them? 

Mr. Kirby: No, I could not say I am familiar with that. They 
have them on each coast, however, as I am informed, both on the east 



JOHN H. KIRBY 69 

coast and on the west coast in British Columbia. Of course their 
market has been to an extent an American market too. They are 
governed, of course, when they cross the line by the cut-throat com- 
petition we give them. We drive them back as much as we can. Is 
that all, Mr. Chairman? 

The Chairman: That will be all, Mr. Kirby, thank you. 

Mr. Downman: Mr. Chairman, I would like to ask Mr. Kirby 
as to the effect of taxation in Texas. I would like to have you ask 
him as to how the taxes are assessed on his properties and the prop- 
erties of other timbermen in Texas. 

The Chairman: Mr. Hurley raised the question this morning 
as to the effect the divergent tax laws in the various states have on 
timber lands. 

Mr. Kirby: In Texas we levy an ad valorem tax, and the fixing 
of the values is largely within the discretion of the tax board known 
ordinarily as the Commissioners Court, composed of four men chosen 
from different sections of the county, and the county judge. For ten 
years or more they have annually increased the values of standing 
timber or timber lands so that the tax burden today is quite onerous. 
We made an argument to those commissioners down there which has 
not been very effective, in an effort to get them to release us from 
those extraordinary burdens on the proposition that the timber man 
only gets a crop from his holdings, his forest, not oftener than once 
every fifty years; whereas, the agriculturist or other person tilling 
the soil in any form, horticulturist or whatever he may be, gets an 
annual crop that enables him to carry his burden, and that that ought 
to be taken into consideration. 

But, at the present time they levy a tax based upon the market 
value of the property which is very burdensome, especially in view 
of the fact that in erecting a sawmill you must have something like 
ten years' timber supply, with a large investment, and the tax upon 
that timber supply becomes quite burdensome carrying it through 
the entire period. 

Mr. Downman suggested to me the matter of tariff taxation. 
We down on the Gulf, of course, are too far removed to be affected 
directly by the little custom house tax that has heretofore been levied 
or by its removal which was done by the last Congress; but I under- 
stand our neighbors and competitors along the Canadian border here 
are substantially affected, in that more Canadian stuff comes into this 
country. That is to say, in so far as the $1.25 which was the former 



70 FEDERAL TRADE COMMISSION HEARING 

tax would pay the freight, they get in. They have a number of these 
foreign forests, these Canadian forests, which can get into Chicago on 
a $2 rate, whereas we, from the Gulf section down there, pay about 
$8, so that in this territory here they have an advantage of us both 
from the fact that they are admitted free and from the circumstance 
that they pay a less freight rate. That I do not understand to be 
involved in this inquiry, however. 

The Chairman: Did I understand you to say that you were en- 
gaged in export trade? 

Mr. Kirby: Yes, we were prior to the European war. 

The Chairman: Could you describe to us how you conduct your 
foreign business, that is, just follow an order through and explain to 
us how that business is conducted ? 

Mr. Kirby: We have sold our business, Mr. Chairman, on this 
side. "We did not have any satisfactory facilities for understanding 
credits abroad, and so we have sold, in so far as the Kirby Lumber 
Company, which I represent, is concerned, and whose business I am 
familiar with, and I am not familiar with the foreign business of any 
of my competitors — we have sold to the exporter at shipside. We 
get our money on this side, and I really do not know the method of 
marketing on the other side or in South America. 

The Chairman: Is that exporter a foreign firm or individual? 

Mr. Kirby: Largely a foreign firm, yes, sir. 

The Chairman: And you just ship and sell to him at shipside? 

Mr. Kirby: Yes, sir, at shipside. When I get my lumber to the 
port he gives me my money and I have nothing to do with it there- 
after and am not familiar with the method of merchandising on the 
other side. 

Commissioner Parry: If he offers you a satisfactory price, you 
take the business? 

Mr. Kirby : Yes, sir, and I have often taken it, Mr. Commissioner, 
when it was not satisfactory. 

Commissioner Parry: You have no means of knowing what price 
he gets? 

Mr. Kirby: No, sir. 

Commissioner Parry: Except in a general way? 

Mr. Kirby: As a rule we know how stuff is quoted on the other 
side. Of course, we get the market reports and we know in the neigh- 
borhood of what stuff is worth. Not so much about South America 
as we do about Europe, Germany, Great Britain and France. 



JOHN H. KIRBY 71 

The Chairman: We are very much obliged to you, Mr. Kirby. 

Mr. Kirby: Not at all, sir. 

Mr. Downman: Mr. Chairman, the fact develops that there are 
one or two of the gentlemen that were on this program, who are not 
prepared. 

The Chairman: Would it accommodate them to be heard in the 
morning ? 

Mr. Downman: Yes, sir, very much indeed. 

The Chairman: We have considerable business which we could 
transact in conference which we have to transact, and we could 
adjourn at this time if it would be an accommodation to you, and 
resume in the morning. 

Mr. Downman: I think it would facilitate the work a good deal 
to permit the rest of these gentlemen to get their papers in better 
shape, and by tomorrow morning I feel quite sure that they would 
have them in proper shape. 

The Chairman: We will be very glad to have that done. We 
have some work we have to do tonight. How much time do you 
think you will need in the morning, Mr. Downman? 

Mr. Downman: I do not think that it will take much more than 
the forenoon. 

The Chairman: If we start in at 10:30 it will be all right with 
you? 

Mr. Downman: I think we can get through by that time, al- 
though I am not quite sure that we can. I was thinking as to the 
afternoon, that there were a number of very important questions that 
we would like the Commission to ask in the case which I think we 
can develop and hand to you in the form of a list so that you can put 
the questions in any way that you may see fit to put them. 

If we adjourn now I think we can get that all in shape. 

The Chairman: Then we will adjourn now until 11:00 o'clock 
tomorrow morning at this place. 

(Whereupon, at 3.20 o'clock p. m., Monday, July 19, 1915, an 
adjournment was taken until Tuesday, July 20, 1915, at 11:00 o'clock 
a. m.) 



THIRD SESSION 

TUESDAY MORNING, JULY 20, 1915 

The Chairman : Are you ready to proceed, Mr. Downman ? If 
so, we will resume, gentlemen, and the Commission room will come to 
order, please. 

Mr. Downman : Mr. Chairman and members of the Commission : 
According to the statement made by the Chairman yesterday, our 
time limit would be one o'clock today. 

The Chairman: You may take such time as you desire, Mr. 
Downman. We will accommodate ourselves to anything you desire. 

Mr. Downman: The reason I mentioned it is because we have 
formulated a program here that is bound to lap over into the after- 
noon session. 

The Chairman: We will arrange our time accordingly. 

Mr. Downman : I would like to ask, therefore, if the Commission 
can give us the time, that we be given time to present the matter prop- 
erly before them. 

The Chairman: We will be glad to do that. 

Mr. Downman: Thank you. 

Before opening this session, I would like to make a statement and 
furnish definite information in regard to the statement to the Commis- 
sion a little later. 

Recently I was in British Columbia, at Vancouver, at which time 
the papers were full of the action of Mr. McMillan, the Chief Forester 
of the Province of British Columbia, in regard to the timber supply 
of that province. The statement was made that Mr. McMillan had 
been authorized by the government to immediately enter into a general 
publicity campaign for the benefit of the lumber manufacturers at 
the expense of the state. 

I believe that that information has been furnished through the 
Consular Department, and it can be easily supplied. 

Another point that I understand the Commission would like to 
have some definite information on is the bearing that the issuance 
of bonds by operators as well as timber owners has had on the in- 

72 



THIRD SESSION 73 

dustry. I would like to suggest to the Commission that that is a very 
long question to take up, and one that I do not believe I would be 
able to throw much light on, although it has some bearing. I under- 
stand that you expect to have various bankers before you, to question 
them on certain matters pertaining to different industries, and I 
would like to suggest that you take it up at that time if you desire 
information through that source. I think they can enlighten you 
very materially as to the effect this bond issue would have. 

I also understand that the Commission has desired some informa- 
tion as to the effect on the lumber industry of so-called substitutes. 
I would like to state that at present the National Lumber Manu- 
facturers' Association is about to put into effect a bureau under the 
auspices of that association for the purpose of taking up and investi 
gating all questions of that kind. The only information that we have 
now is information that has been compiled by the government itself, 
and the compilers of it say that it is not of very much value because 
they have not been able to reach the information from a large enough 
number of sources. It has been generally estimated by the government 
officials that the reduction in the use of lumber in the last few years, 
of 50 feet per capita, has been almost directly attributable to the 
inroads and the activities of the so-called substitutes. 

To bring out a lot of matter that we think you want, I want to 
ask permission that Mr. Charles S. Keith, who has given a great deal 
of time and study to this proposition, and who addressed you yester- 
day, be permitted to sit here with me, as well as General Boyle, to try 
and draw out of the people who address you the good stuff that you 
want, or the bad stuff — we claim it is mighty bad. 

Before I go to that, the question was brought up yesterday with 
regard to the ability to co-operate. I will read from a stenographic 
report of a meeting of the National Veneer and Panel Manufacturers' 
Association on June 8th. This has just been handed me. It is a 
statement made by Mr. Howard P. King, of the Otto-Rumcke Company 
of Melbourne, Australia, in which he states : 

"We have an association in Victoria and the timber or lumber 
merchants meet and co-operate together so as to fix prices. We have 
meetings similar to this to bring out a better feeling among the mer- 
chants. Some of the merchants break prices sometimes. The Associ- 
ation has been in existence for the last ten years, and it gives the 
smaller merchant as good a chance as the bigger merchant." 

The Chairman : Is there any published source for that statement ? 



74 FEDERAL TRADE COMMISSION HEARING 

Mr. Downman: Mr. Kellogg, have the Veneer people an organ? 

Mr. Kellogg: Yes, I think this has been published in the trade 
journals. It is taken from the stenographic report of that meeting. 
It was a statement made in an open meeting at the Auditorium Hotel 
on June 8th. I happened to hear the statement myself and I can say 
that it is substantially correct as reported there. 

The Chairman: "What was the convention or meeting? 

Mr. Kellogg: It was the regular meeting of the National Veneer 
and Panel Manufacturers' Association. 

The Chairman: Held here? 

Mr. Kellogg : In the Auditorium Hotel. 

The Chairman: Have the proceedings been published? 

Mr. Kellogg: The proceedings have been published in the trade 
journals. Whether that particular report was published I cannot say, 
because I have read it carefully, but this is a copy of the stenog- 
rapher's report of the meeting. 

Mr. Downman: What is your idea, that we furnish you with the 
published report? 

The Chairman: Yes. We do not want it as hearsay. We want 
to verify it from the original sources. There is no reflection upon 
your sincerity in the matter. 

Mr. Downman: No, I understand, and Mr. Kellogg will get that 
authenticated, or make this authentic before it is presented. I just 
read it as it was presented to me here a moment ago. 

Now, we will proceed, and I would like to introduce to you Mr. 
Edward Hines of Chicago, Illinois, who will touch upon some matters 
that he thinks are of very great importance to the lumber industry. 



STATEMENT OF MR. EDWARD HINES 

Mr. Hines: Mr. Chairman and gentlemen — 
The Chairman: What subject do you propose to discuss? 
Mr. Hines: It is a combination, really, of several subjects. 
First, an attempt to place before you the position of the lumber indus- 
try of the United States. Then it touches also on the competition we 
have outside of the United States and brings in latterly the question 
of Canadian competition, direct between Chicago and New York City, 
which are our greatest markets in the United States, and on the 
question of what has occurred since the tariff was removed on lumber. 



EDWARD HINES 75 

The Chairman: Of course, the tariff situation is a matter which 
we do not care- particularly to take up at this time. 

Mr. Hines: "We feel this, if we can place in a very brief way 
before you the subject, possibly later on your body may feel the 
importance of making a recommendation to help our industry. 

The Chairman: We may take that up later, but I do not think 
it is exactly germane for the purpose of this meeting as we under- 
stood it from Mr. Downman, and inasmuch as the time is limited, I 
think perhaps we had better defer that matter. 

Mr. Hines: Is it your idea that my remarks should not be 
made at this time? 

The Chairman: Insofar as it relates to the tariff, I think it 
might be well deferred. On others matters we would be glad to 
hear from you. 

Mr. Hines: It is really a question, if I can read my paper, it 
is intertwined with some other statements I have. Of course, we 
will abide by whatever the Chairman desires in the matter, but I do 
not think it will take over three or four minutes, so far as the tariff 
is concerned. 

The Chairman: Well, suppose you proceed. 

Mr. Hines: I wish to first impress upon the minds of the Honor- 
able Members of this Commission, the magnitude and importance of the 
lumber industry of the United States. It ranks first in the number of 
employees engaged, of any manufacturing industry in the country. 
Over one billion dollars is invested exclusively in saw-mill plants and 
accessories, this not including the standing timber or raw material, 
which generally is purchased in sufficient quantities to insure the run- 
ning of the plant for fifteen to twenty years or more, and justify the 
expenditure for the building of the plant adjacent to same. This indus- 
try is most unique and stands alone, as against practically every other 
industry (except possibly the mining industry) because in most other 
lines factories can be built at some central advantageous point and 
the raw material brought from various places to such plants for almost 
an indefinite period. I wish to call your special attention to the fact 
that the more modern saw-mill plants represent an expenditure of 
over half a million dollars — the average investment in timber or 
stumpage made prior to the erection of the plant is generally five 
to six times the value of the plant ; so you can appreciate the stupendous 
sum that is invested in timber, when you figure that the plants alone 
in this country are reckoned at a cost of over one billion dollars, and 



76 FEDERAL TRADE COMMISSION HEARING 

the plants being not to exceed, generally speaking, more than twenty 
percent of the value of the timber secured for the operation of the 
plant. 

I wish also to call your particular attention and have you weigh 
carefully, that the National Lumber Manufacturers' Association is a 
body of practical and active manufacturers. We do not wish you to 
confuse this with the comparatively few in number, classed as timber 
investors, many of whom never manufacture a tree and have no inter- 
est in manufacturing operations. 

This industry, national in its scope, is represented by some 48,-000 
saw-mills. Few people of this country recognize the enormous extent 
of this industry. It has been, in many minds, classed as a local indus- 
try, and confined to a few states. Far from such being the case, the 
■ lumber industry exists in almost every state. It is a leading industry 
in 25 states, and the chief industry in approximately 15 states. The 
manufacture of lumber began in this country about 300 years ago 
on the New England coast, and yet today Maine is still one of the 
leading lumber manufacturing states in this country. The territory 
covered by the lumber industry where it is a prominent factor covers 
the entire New England states ; New York also manufactures a very 
large amount; Pennsylvania, while not generally considered a lumber 
manufacturing state, has more saw-mills than any other state except 
North Carolina and Virginia, manufacturing in 3,054 saw-mills, or a 
total of 1,462,000,000 feet of lumber, almost as much lumber as the 
state of Oregon, which is considered almost exclusively a lumber pro- 
ducing state. Massachusetts probably surprises many in the manufac- 
ture of 360,000,000 feet of lumber, operating 643 saw-mills. It is the 
leading industry throughout all the Southern states, which today pro- 
duces a larger amount of building material than any other section of 
this country. The lumber industry is a large factor in Tennessee, 
Kentucky, Arkansas and Missouri. It is an important industry in 
Wisconsin, Minnesota and Michigan; in the West, a chief feature of 
California, Washington, Oregon and Idaho. In many towns it is the 
only industry, and supports the entire town ; in fact, many towns have 
been built, and furnishes the entire means for the livelihood of the in- 
habitants of hundreds of towns in a number of states. The above are 
the facts under normal conditions. 

Among these 48,000 saw-mills the greatest part of them are owned 
by individuals or small companies, many of the concerns owning but 
one saw-mill; it is safe to say that there are at least 28,000 individual 



EDWARD HINES 77 

saw-mill operators in the United States. These owners are actively 
engaged in the business and should be entitled to a reasonable operating 
profit. This business more than any other is pioneering in every sense, 
involving large expenditures of money in advance, causing much per- 
sonal hardship and the exhibition of much pluck, courage and appli- 
cation. In the employment of labor this industry stands first among 
the great manufacturing lines, by employing approximately 700,000 
men and furnishing a direct livelihood to them, and an indirect liveli- 
hood to the balance of the community in the various towns where the 
saw-mill is the only industry in that particular vicinity. 

The above is the condition that the lumber industry should be 
in under normal conditions ; conditions under which it should exist. 
The present condition presents almost the opposite picture. On the 
Pacific coast a large percentage of the saw-mills are shut down — the same 
conditions exist in the Southern states. Those that are running are 
operating on a very low wage scale. In the Inland Empire (the states 
of Idaho, Washington and Montana), conditions are fast assuming 
the same state, some concerns having gone in the hands of a receiver; 
others being unable to meet fixed charges, in many cases the present 
prices received not netting operating cost, to say nothing of getting 
anything back for the timber cut. In the pine region of Minnesota, 
Wisconsin and Michigan, conditions have been gradually getting worse 
month by month, until today many operators are facing the question 
of having no more piling room on which to pile lumber, and the ques- 
tion of getting sufficient insurance to cover the manufactured product 
now cut; facing the problem of shutting down their mills at this 
season of the year, most inopportune, and throwing out of employment 
a vast army of workingmen directly, not to speak of the loss to the 
community by such enforced idleness where such properties are located. 

This great industry, under normal conditions, stands first as a 
purchaser of farm products. Hence, whatever affects this industry and 
lessens its requirements and purchasing power must necessarily also 
affect the farmers and other producers of the United States. 

It furnishes to the railroads the largest number of cars of freight 
of any industry and is second only to coal in the actual tonnage it 
gives to the railroads. 

No lumber properties in any section of the United States is doing 
anything like a normal business, which is a matter of common 
knowledge. 

In lessening the number of cars it gives the railroad companies to 



78 FEDERAL TRADE COMMISSION HEARING 

haul, it must necessarily seriously affect the earning power of the rail- 
roads and its large army of employees. It has been estimated that it 
furnishes lumber aggregating over two hundred million dollars in 
freight annually, the largest amount in freight, in dollars and cents, 
of any commodity. 

Eighty percent of the gross price of lumber delivered to any of 
the great central consuming districts of the United States, taking as 
a basis, Buffalo to Chicago, goes to labor, farm products and trans- 
portation. Therefore when a large reduction in shipments takes place 
it must necessarily quickly seriously affect the whole nation. 

The lumber industry is in a peculiarly unhealthy condition at the 
present time. The depression following the year of 1912 caused a great 
falling off in the price of lumber, and inflicting, we think, a greater 
hardship on lumber than any other commodity, much greater than in 
comparison befell anything that comes in competition with it; this 
particularly coming about in our judgment from the fact that there 
are 48,000 saw-mills in the country, not alone competing one with the 
other, but different species of wood of the country being active com- 
petitors for the same trade, particularly in the great consuming states 
and cities of the United States ; in the Central Mississippi Valley, taking 
for instance from Central Wisconsin and Minnesota to the Ohio River ; 
from Pittsburgh to Denver; the territory that uses the largest proportion 
of lumber of any like territory in the United States. Yellow pine 
from the South is an active competitor for this business. The Pacific 
coast states, Washington, Idaho and Oregon are strong competitors. 
And at the same time the states of Minnesota, Wisconsin and Michigan 
are direct and strong competitors for this same trade. Canada is a 
great competitor and with peculiarly strong advantages over all the 
competitors in the West, Northwest and South, in the great consuming 
market of the Great Lakes. 

We desire to call your special attention to the peculiar special ad- 
vantages that Canada has over practically any of the manufacturers 
located in the United States, in reaching the greatest, not alone con- 
suming, but manufacturing cities in the United States, like Milwaukee, 
Chicago, Bay City, Detroit, Toledo, Cleveland, Buffalo, Tonawanda and 
New York, and many of the smaller cities on the Great Lakes; and 
through these gateways to the greatest consuming states of the United 
States, like Illinois, Indiana, Ohio, Pennsylvania and New York state. 
Canada lias a great advantage particularly in the transportation of 
its product in a very low water rate of freight, cheap labor, and cheap 



EDWARD HINES 79 

farm produce, and comparatively no taxes. Thus lumber coming from 
Canada to the great gateways above mentioned largely manufactured on 
the Georgian Bay, an arm of the Great Lakes, directly accessible by 
cheap water transportation, the average cost of transporting Canadian 
lumber to the respective cities above mentioned is about $2.00 per 
thousand feet. The average cost of transporting the same character 
of lumber from Minnesota and Wisconsin, which today are the closest 
markets to this territory, is 22 to 26 cents per hundred pounds, or $5.50 
to $6.00 per thousand, or about 200 percent greater than from Canada. 
From the great Southern states, which are the largest producing dis- 
tricts of lumber in the United States, like Alabama, Louisiana, Missis- 
sippi, etc., the rate to Chicago is approximately 25 cents ; to Buffalo 
approximately 32 cents, or say an average to this particular territory 
of 28 cents per hundred pounds — taking yellow pine, averaging 3,000 
lbs., the freight would amount to $8.50, as compared with $2.00 from 
Canada, or 300 percent greater from the South than from Canada. 
And this is not all. Take lumber coming from the Inland Empire, the 
rate to Chicago being 42 cents; to Buffalo 55 cents, or say an average 
of 50 cents, the lumber rough would be $12.50 per thousand feet, or 
500 percent greater in freight than from Canada, on identically the 
same character of lumber. Further, lumber coming from either Wis- 
consin and Minnesota, South or the West, on which the freight averages 
from 200 to 500 percent more, is paid directly to American railroads, 
of which a very large proportion goes to American labor, and directly 
to the consumers, as compared with lumber coming from Canada by 
water transportation. Note the great advantage the Canadian operator 
has in transportation alone ; the unique and favorable position he occu- 
pies, being on the very border of the great consuming markets of 
the United States, as compared with the South, 1,000 miles from such 
market ; Wisconsin an average of 500 miles ; the Inland Empire about 
2,000 miles, and the Pacific Coast about 2,500 miles. In addition to 
this there are large quantities of lumber produced in the Rocky Moun- 
tain region of Canada, and in British Columbia under conditions 
which enables them to ship the product to the United States on a very 
favorable basis. 

This is not all the advantage she has over the American manu- 
facturer ; first, labor is generally from 10 to 15 percent cheaper than in 
the American mills; second, she has a great advantage in mode of 
taxation, in most of the cities the local districts vote to the manufac- 
turer or industry, an absolutely free personal property tax as com- 



80 FEDERAL TRADE COMMISSION HEARING 

pared with the large taxes paid by the American manufacturer. Third, 
the Canadian operator does not have to invest large amounts of money 
in advance in the way of purchasing standing timber to insure his 
mill output; the Government owns the timber and leases, so to speak, 
a tract or district to the manufacturer, whereby he is only obliged to 
pay for the timber as he cuts it, and pays no interest; compare this 
with the American manufacturer who is obliged to buy his timber from 
fifteen to twenty years in advance of his cutting it, interest and tax 
charges starting immediately, also subject to risks of fire, timber blow- 
ing down, etc., while the Canadian operator is not subject to these risks, 
as the timber belongs to the Government, and any loss is a Government 
loss. Also the cost of farm products is generally less in Canada than 
in the United States, the Canadian operator pays less for his horses, 
food-stuffs, etc. Fourth, the standard of living in Canada, of the 
Canadian woodsmen and laborer, is not to be compared with that of 
the American, enabling him to live and work for less. 

Therefore it is apparent that the present low price of low-grade 
lumber in the United States, which is a tremendous factor in the aggre- 
gate, is largely influenced by the large importations of low-grade lum- 
ber from Canada. The Canadian manufacturer is anxious to log, saw 
and ship this low-grade product, and can do so on account of their 
cheap labor, cheap farm supplies, and the still greater advantage 
that they have in certain parts of Canada, by cheap water transporta- 
tion to our largest and best markets. This permits the Canadian manu- 
facturer to utilize almost every tree in its entirety and to net the manu- 
facturer something even on the cheapest kinds of stumpage and most 
defective material, as against compelling the American manufacturer 
to leave in the woods a large proportion of coarse timber, semi-defective 
material, in order that the average price of that which he does utilize 
will warrant his expense of logging, manufacturing and shipping. 
Not alone is the price of low grade lumber in this country depressed, 
but there is directly lost to posterity in this country, the very large 
quantities of timber that is now being left in our American forests, 
as whatever is left must go to waste. If for no other reasons, but in 
the interests of that which affects us all — "conservation" — should not 
this Commission propose something that would remedy this awful and 
deplorable condition of waste? 

On the importations from Canada on basis of about one billion 
feet per year on a conservative figure, the American railroads lose from 
five to seven million dollars in loss of revenue, as compared, if this same 



EDWARD HINES 81 

quantity of lumber would come from the various manufacturing points 
in this country, and what is lost to the railroads of this country, must 
necessarily mean a national loss. Since the lumber industry occupies 
such a high place in this country, ranking first in the number of em- 
ployees, in consumption of farm products, in the use of manufactured 
goods, and in the amount of freight furnished the railroad companies, 
anything which will depress it, must quickly be followed in all associ- 
ated lines of business, in the commercial and industrial activity of 
the entire nation. 

It would seem, therefore, that the American people, through a 
body like the Federal Trade Commission, after carefully considering 
the conditions of this great industry at the present time, would be 
warranted in recommending to the Congress of the United States, 
that an adequate import duty, which, as shown from the past, could 
properly be classed as a revenue duty, be put upon the statute books 
of this country, as a part protection to not alone this industry directly, 
but to labor in general, and the many diversified interests that depend 
upon their livelihood on this industry. 

The condition at the present time is, by having removed the tariff 
on lumber, the markets of our 100,000,000 people of the United States 
are thrown open for the benefit of the 10,000,000 people in Canada, 
inflicting a useless loss upon this industry, the American people, and 
to the United States Government. And Canada offers absolutely nothing 
in return in the way of reciprocal relations. This is most particularly 
illustrated in her duty on lumber imported from the United States, 
when dressed, of S2y 2 percent, and if rough, iy 2 percent. And in the 
past there has been some kinds of lumber exported from the United 
States to Canada, such as various kinds of hardwood, maple flooring, 
and large quantities of lumber from the Inland Empire, and yellow 
pine from the South to some extent. But this is not all; it is particu- 
larly illustrated in her law absolutely prohibiting the exporting of 
any timber or logs to be manufactured by mills in this country, com- 
pelling the Canadian timber to be manufactured only in Canada, thus 
furnishing employment to her own citizens, and furnishing a market 
for her own farmers, as against the loss to the American laborer and 
the American farmer. She will not even allow a single piece of ma- 
chinery of any kind to come in from this country for the construction 
or operation of her saw-mills, except on the payment of a heavy pro- 
tective duty, which is almost prohibitive. While under the present 
free entry from Canada into the United States, every foot of lumber 



82 FEDERAL TRADE COMMISSION HEARING 

coming from Canada to the United States, deprives this country of its 
former revenue, the American railroads of its cost of transporting 
same, as compared with being manufactured here ; the American laborer 
of his just proportion of what he would obtain if the lumber were 
manufactured here; the American farmer of his just proportion in 
the sale of foodstuffs and supplies, if the stock were manufactured 
in this country; the American manufacturer of various lines of ma- 
chinery, oils, belting, and other accessories, if the lumber were manu- 
factured in American saw-mills, as compared with Canada — the general 
loss to this country of fully 80 percent of the cost price of that lumber. 
Taking for instance lumber averaging $15.00 per thousand, fully $12.00 
per thousand is lost to the American nation, as fully that proportion 
of the cost of lumber, if manufactured in this country, would be 
paid out directly and indirectly to American labor and producers. 

It has been perfectly plain to anyone watching the lumber business 
during a twelve years' period, when the latter enjoyed a duty, even 
though very small, that the lumber trade enjoyed the greatest degree 
of prosperity, not alone the manufacturer, but the American laborer, 
mechanic, farmer, and railroads of this country, while on the contrary, 
since the duty has been taken off, this industry has become almost 
paralyzed, and many concerns bankrupt. 

Because of the navigation laws of the United States, the American 
lumber manufacturer is compelled to ship lumber from one American 
port to another in an American boat, flying the American flag, built 
by American labor, and manned by American seamen, living under 
American conditions; while the Canadian manufacturer is at liberty 
to ship from Canadian ports on either the Atlantic or Pacific, to any 
American port, in any character of foreign boat. This represents 
conservatively an advantage of $2.00 per thousand feet on shipments 
from Pacific ports in Canada to Atlantic ports in the United States, 
through the canal or otherwise. When normal conditions are restored 
in Canada following the present European war, the Canadian lumber 
manufacturers can and will undoubtedly take advantage of this situ- 
ation, in competing for the big markets on the American Atlantic sea- 
board to the detriment of the manufacturers on the American Pacific 
coast. 

The entire lumber manufacturing industry of the United States, 
represented by the National Lumber Manufacturers' Association, has 
lull confidence in the honesty of purpose of your body, and feel that 
only by full knowledge of conditions in pur business can we receive 



EDWARD HINES 83 

the assistance that this great industry is entitled to. Therefore, after 
you have full opportunity of considering the briefs we have submitted, 
there is any further information desired, we feel it a pleasure and our 
first duty to furnish same promptly. 

Mr. Downman: If the Commission desires to ask Mr. Hines any 
questions he would be glad to answer them. If not, Mr. Keith would 
like to ask him some questions in regard to his paper. 

Mr. Keith: Yesterday the statement w T as made that the loss in 
stumpage by reason of waste going on annually, was 15,000,000,000 
feet. Have you made any analysis showing what the effect of that is 
upon the railroads and labor employed by the railroads, in point of 
tonnage lost? 

Mr. Hines : I think it is safe to say that the loss under the pres- 
ent conditions of the price of lumber, taking the country as a whole, 
but particularly in the South and West, and the hemlock in the North, 
is fully 25 to 30 per cent that is now being left in the woods, which 
naturally goes to waste. That would mean about 15,000,000,000 feet 
of lumber which should be manufactured in the United States. Of 
that the railroad companies lose, I think, $5.00 to $7.00 a thousand 
from the loss of transportation, and 15,000,000,000 feet multiplied by 
$7.00 per thousand would reach the huge sum of $105,000,000. 

The Chairman: That is left in the woods because it is not profit- 
able to manufacture? 

Mr. Hines : The idea is this : at the present time the price of lum- 
ber of low grade and defective timber and top logs will not bear 
the cost of logging, manufacturing and transportation. Therefore, 
the manufacturer is obliged to leave it in the woods, and he is simply 
taking about 65 or 70 per cent of the better part of the tree. 

The Chairman: Is that affected by the use of substitutes for 
lumber ? 

Mr. Hines: It is affected to a certain extent by substitutes. It 
is affected through a combination of reasons. One of the reasons, in 
my judgment, is, as I explained, first, the cost of transportation 
From Georgian Bay to Buffalo it is $2.00 per thousand feet, and the 
cost of transporting the same lumber from Mr. Kirby's mill, who is 
One of the large operators in Texas, of the same character of lumber, 
would be about $10.00 a thousand. 

Commissioner Hurley: They do not ship Texas lumber to Buf- 
falo, do they? 

Mr. Hines: Large quantities. I should say in Chicago today 



84 FEDERAL TRADE COMMISSION HEARING 

it is safe to say that 75 per cent of the lumber being used is coming 
from the states of Texas, Louisiana and Mississippi. 

The Chairman : I have seen it estimated that a very large sum of 
money, I think approximately $6,000,000 a year, is spent in the adver- 
tising alone of substitutes for lumber. I heard it estimated that 50 
per cent of the annual output or consumption of lumber has been sub- 
stituted by cement, that is, that enough cement has been produced in 
the last few years more than in the preceding years to substitute for 
50 per cent of the annual consumption of lumber. Naturally, if those 
things are true, it reduces the demand and consequently there is a loss 
for some of your mills, and it makes it less profitable to use the boughs 
and those parts of the tree which you leave in the woods. I was won- 
dering what information you had with reference to that situation? 

Mr. Hines : Mr. Chairman, we have no definite information, but 
we are now attempting to collect data. But in a practical estimate, 
from several conferences we have had, we do not figure it as over 10 
to 15 per cent. 

The Chairman: Ten or 15 per cent? 

Mr. Hines: Ten to 15 per cent. 

The Chairman: Reduction? 

Mr. Hines: Reduction. But we are attempting — 

The Chairman: So your substitutes would be one of the factors 
in the depression in the lumber business? 

Mr. Hines: Absolutely. It is a combination of circumstances 
which brings us to our present condition. 

The Chairman: Is that growing, in your judgment? 

Mr. Hines: I think in some lines. For instance, the box manu- 
facturing business. I think it has reached its growth. We are at- 
tempting to bring that up with the classification committees and have 
up now with the Interstate Commerce Commission a request that they 
keep a list showing causes of loss and damage — they claim there is 
$40,000,000 lost per year in loss and damage claims. And we are 
contending, and I think justly so, that a large amount of that is lost 
through handling the goods put up in substitute packages like paper. 
We are asking them if they can separate it for a period, to see how 
much the loss would be in wooden packages. We are co-operating 
with the box manufacturers. We have no direct interest in the box 
manufacturers, but we have a wonderful indirect interest, because 
they are large users of our raw material. 



EDWARD HINES 85 

The Chairman: How recently has this substitution of other prod- 
ucts for lumber come into the lumber trade as a factor? 

Mr. Hines: Well, it has been growing gradually, I should say, 
during the last seven or eight years. 

The Chairman: Is the percentage of growth annually as large? 

Mr. Hines: No, I do not think so. I think the advertising 
mediums are attempting to exploit and explain to the consumers a 
very much larger amount than the actual figures will show. 

The Chairman: Has your organization started any investigation 
looking to see how much value there is in metal fencings, metal sashes 
and steel garages and steel forms for concrete construction, metal 
lath, culverts, and all that sort of thing? 

Mr. Hines : We have just started a department having that in 
view. It has taken us some time to raise the necessary amount of 
money, but through the administration of our present President,* Mr. 
Downman, he has been very successful and we have just raised a sum 
sufficient for the next five years to enable the management of the 
National Lumber Manufacturers' Association to look into those ques- 
tions and prepare a proper offset in their advertisements. 

Mr. Keith: I would like to ask if it is not true that the use of 
cement in construction as a substitute for wood requires the use of a 
large amount of lumber for forms? 

Mr. Hines : It has been estimated by various engineers and con- 
tractors in this city, where a large amount of cement is used, that 
almost the same quantity of lumber of a common character of lumber 
is used in the forms, and which are only used once, as if the con- 
struction was built of brick or stone, so that so far as cement is con- 
cerned, I think I am safe in saying it does not affect our business more 
than ten to fifteen per cent. 

Mr. Keith: Is it not true, taking the census house-to-house report 
for 1909, and the subsequent reports which were mail census reports, 
that the figures back show no diminution of lumber consumption per 
capita in the United States? 

Mr. Hines: The best figures obtainable do not show much over 
five per cent. That is a very small difference. 

Mr. Keith: Do you not think that five per cent is more due to 
the depression in business rather than to the campaign of substitutes? 

Mr. Hines : We are positive on that point. For instance, the 
great railroads of the United States have been using very little lumber 
for the last two or three years ; the larger corporations have been 



86 FEDERAL TRADE COMMISSION HEARING 

depleting their stock and building in general has been less, so we 
are confident that if we had a normal condition of affairs the same 
amount of lumber per capita would have been used as heretofore. 

The Chairman: Have they tried concrete foundations for rail- 
roads, that is, railroad ties? Have they been successful? 

Mr. Hines: "Well, that I could not say in a practical way, except 
just in general talks with the railroad engineers, and they claim 
it is too rigid, too jolty. 

The Chairman: There is not any encroachment in that line? 

Mr. Hines: No, not at present. 

The Chairman: That is a very extensive part of your market? 

Mr. Hines: Yes, railroad ties are a tremendous factor in the 
industry. 

Mr. Keith: In your figures of $105,000,000 loss of revenue to the 
railroads, by reason of waste of forest products, what proportion of 
that do you figure goes normally to the cost of transportation in the 
form of labor? 

Mr. Hines: I think fully 50 per cent would go into that. 

Mr. Keith: Then there would be a loss to labor in the future of 
$50,000,000? 

Mr. Hines: Fully $50,000,000, which is a loss to the American 
citizens. 

Mr. Downman: The next gentleman on the program is Mr. E. B. 
Hazen, representing the West Coast of Washington and Oregon on 
conditions in that particular territory. 



STATEMENT OF E. B. HAZEN, REPRESENTING WEST 
COAST LUMBER MANUFACTURERS' ASSOCIATION 

Gentlemen of the Commission: 

Knowing that your honorable body is shortly to hold a hearing 
on the Pacific Coast, the West Coast Lumber Manufacturers Association 
did not prepare a very voluminous statement. In fact I was sent on 
here on a few hours' notice, without any preparation. En route I drew 
up a few remarks which cover a personal point of view entirely. I want 
to beg your indulgence while reading them, but first desire to comment 
upon the documents prepared by our Association, mailed to me here, 
and which are in your hands, labeled Exhibits "A" to "H," inclusive. 



E. B. HAZEN 87 

Timber 

Exhibit "A" is made up to show the timber situation as to public 
and private holdings, and the extensive timber interests West of the 
mountains in Washington and Oregon. The Pacific Northwest holds 
1,500 billion feet of timber — about 57% of the country's stand — 
and 85% of this is West of the Cascades. When this is considered it is 
easy to comprehend the extreme seriousness of the present lumber de- 
pression and its effect upon the general business conditions in Oregon 
and Washington with its greatest industry almost paralyzed — an in- 
dustry upon which 60% of the people are dependent. 

An item in Exhibit "A," to which we desire to particularly refer 
is the indication that the Government owns about one-third of the timber 
of the West, and consequently the public is as heavily an interested 
partner in this bad situation. 



Curtailment 

Exhibit "B" shows that in 1913 about 75% of the ten hour capacity 
was in operation, but now, however, only about 30% of this capacity 
is turning over. 

Exhibit ' ' C " has to do with taxes on timber, showing the enormous 
increased burden of taxes. These figures are taken from actual tax 
assessments on certain sections. Please note some of the increases from 
1904 to 1913 are 405%, 260%, 364%, 1057%, 734%, etc. Please note 
also, for example, that in Chehalis County, Wash., one of the heaviest 
timbered counties on the Pacific Coast, in 1908 the valuation on timber- 
lands was seven million dollars, carrying 49%% of all taxes, and in 
1912, after four years of cutting, the valuation is placed at fifteen 
million dollars, and timber is still carrying 47V3%, while personal prop- 
erty has increased 50% in valuation, and its percentage of tax burden 
has decreased from 14%% to 1014%. The tax question is a very 
serious one to us in the Pacific Northwest. 



Costs and Selling Price 

We are particularly fortunate in that we are able to present to 
you copies of the following : 

Exhibit "E"— Composite Logging Costs, Puget Sound. 



88 FEDERAL TRADE COMMISSION HEARING 

Exhibit "F" — Composite Selling Price and Manufacturing Cost 
Statements — six representative plants. 

Also following Exhibit "F" you will find a copy of Composite 
Cost Statement covering twenty representative sawmills. (Exhibit G.) 
All of the data revealed in these two Exhibits (including the twenty 
mill composite statement) is taken from the report of Mr. Austin Cary, 
who has been conducting a study of the Pacific Northwest lumber in- 
dustry for the Departments of Agriculture and Commerce for some 
months past. 

We can furnish you with certified copies of all these findings over 
the signature of Mr. Cary's accountant, Mr. Mcintosh, if you desire 
them. 

Exhibit "H" shows graphically for three years, the production, ship- 
ments and prices from 80 mills. 

Exhibit "F" indicates an actual loss of $1.84 per thousand feet 
to Pacific Northwest manufacturers on a $10.74 cost and $10.90 selling 
price. This is considering $2 as the average cost of stumpage today. 
This is without allowing them any interest whatever on investments in 
plants and other equipment, nor on capital invested in stocks and 
accounts. This would net an actual loss besides sacrificing interest to 
the manufacturers of these two States for 1915 of twelve million dollars 
on a normal ten-hour output. 

Now, with your permission we will proceed to a few remarks on 
suggestive helps, which are made, as I said before, from a purely per- 
sonal viewpoint. 

Suggestions for Possible Remedies 

I will comment upon five of the most important helps as I view 
them in which it would seem that your honorable body could assist 
the industry. 

(1) Devise means for securing minimum selling price not less 
than cost of production. 

(2) Establishment of merchant marines, so we can compete with 
tonnage under other flags. 

(3) Consideration of Canadian competition. 

(4) Withholding of Government stumpage from the market as 
much ns possible. 

(5) Favorable recommendation for co-operative exploitation and 
selling of lumber both at home and abroad, through sales companies. 



E. B. HAZEN 89 

Means for Securing of a Minimum Selling Price Not Less Than Cost 

of Production 

There were 46,000 active sawmills in the United States in 1909 
according to the Government Census. 45,000 of these mills produced 
half the lumber, and only 1,000 the other half. It would seem that 
permission by the Government should be given to the lumber manu- 
facturers to co-operate to curtail output, and to maintain a cost price 
so as to secure a 6% return to the capital invested, or even that the 
Government should make such co-operation compulsory. It would be 
difficult of accomplishment through voluntary co-operation. 45,000 small 
and inefficient units, 33,000 of which produce only 200 cars of lumber 
per year each, and 12,000 of which, only twenty cars each annually, 
cannot be brought to such co-operation. 

The Chairman: Just a minute; what percentage of the total 
output do those small mills' that you have just described, produce? 

Mr. Hazen: 45,000 produce one-half and the other 1,000 produce 
the other half. 

The Chairman: 45,000 produce half? 

Mr. Hazen: 45,000 produce half the lumber, and 1,000 the other 
half, and of the 45,000, 33,000 only produce 200 cars a year, and 12,000 
twenty cars each. 

Because of the substantial inroads being made by substitute 
materials, it is a fact that lumber manufacturing must develop from 
the crude harvesting of nature's crop to a higher efficiency, large 
scale manufacturing, waste utilizing and modern merchandising busi- 
ness means that such action on the part of the Government as sug- 
gested is of vital necessity. 

The Government investigator, now on the Pacific Coast, finds that 
lumber must bring $14.00 to $15.00 per thousand feet average at the 
mill to return 6% on taxes and fire patrol on the raw material invest- 
ment in the tree, and 12% on the investment in equipment, stocks, etc. 
Lumber is now selling for $9.00 to $10.50 per thousand feet at the mill. 
If the sale of the product at not less than $15.00 that could be accom- 
plished through compulsion, or even perhaps through co-operation in the 
interest of not only the lumbermen, but of labor, which represents 
80% of the cost of lumber at the mill, and in the interest of the public, 
because of the fact that a natural resource is being destroyed without 
a just return to the community depending upon it. What would be the 
practical result ? The minimum price would be the price at which lum- 



90 FEDERAL TRADE COMMISSION HEARING 

ber would be sold, and the dealer would have a stable market, which 
he desires. The factor of speculation with him would be eliminated. 
Then there would be a scramble for existence among manufacturers, 
just as today, and the fittest would survive, but the scramble would 
be on a different basis entirely. At present the fittest is the one who 
can stand to lose money in the largest quantities, or he who buys out 
the bankrupt at 50c on the dollar, but with a loss to the entire com- 
munity of the producing zones of both the fit and the unfit, because 
of reduced wages, operating short time, or not at all, and resultant 
community suffering. In Oregon where normally we cut two billion 
feet, 6.2% of the laboring men have been dependent upon the lumber 
industry directly, and today not over 30% of the sawing capacity is 
active, with about six hundred million being cut. 

With the cost as a compulsory minimum price there would be a 
stimulation at once in merchandising activities. The lumber maker 
would have to develop into a merchant manufacturer. In order to 
develop trade in the field, he would have to place high type, energized 
salesmen out to sell goods not only to dealers and large industrial trade, 
but they would be forced to broaden the scope of their efforts to 
include stimulation of consumption of lumber. They would interest 
themselves in securing fair building codes, in silo use, in wood block 
pavements, in mill constructed buildings, in the frame type of house 
construction, in the newly platted suburban additions. They would be 
fortified by literature from their home offices. It would still be the 
survival of the fittest, but the fittest would be the most efficient, not 
the most inefficient, as now. But before this sort of activity could be 
undertaken, the producing units would have to be large, or sell through 
one source, because a small output cannot sustain such merchandising 
effort. A compulsory price would force the consolidation of now small, 
independent producers into ownerships, making from three hundred 
to five hundred million per year, or into co-operative agencies, so that 
they could engage in the battle for survival, and the battle would be 
one of efficiency, not price cutting. Of course, if the minimum price 
arrived at is based upon the average cost of stumpage, then the manu- 
facturers now owning the lowest cost stumpage would have some advan- 
tage, but they would have to hold their own in the efficiency fight and 
the higher cost stumpage owner would be stimulated to greater effort 
to hold his own in selling the product. When it came to over-produc- 
tion, and necessary curtailment, the low cost stumpage owner could out- 
produce the highest cost owner, provided he was as able as his competi- 



E. B. HAZEN 91 

tor in marketing. Would not this process of elimination be more equit- 
able and fair than the grinding of wheels now in progress? 

Of nearly as great importance as the necessity of better selling 
methods, is the necessity for more scientific manufacturing, logging and 
waste utilizing. Now fully 15% of the logs of low grade are left upon 
the ground. Large scale producing units would accomplish this also 
through modern departmentizing in charge of highly skilled department 
heads, as contrasted with the now usual one-head small operation. 

This situation is more true of the Pacific Coast than in the South. 
There are larger operations in the South. 

The Chairman: Do any of the large concerns utilize by-products 
now and save any of this waste? 

Mr. Hazen: The larger concerns work their logs a great deal 
closer. They are not utilizing the by-products exactly, any more 
than that they have better equipment and work their stock up into 
special things. 

The Chairman: Do they have these departments of efficiency? 

Mr. Hazen: The big concerns do, yes. "We have very few on 
the Pacific Coast. They are almost all small mills, not small in ca- 
pacity, they cut from 10,000 to 12,000 feet an hour, but they are 
individual heads. 

The evolution of the lumber business is going to be along these 
lines regardless of Government assistance, but without their assistance 
in the establishment of a minimum price, it spells a long, drawn-out, 
cruel process of elimination via the Sheriff's office, with the survivors 
consisting of the lowest cost stumpage owners, the large acreage owners, 
and those of the long pocket book variety through the slow process 
of losing prices until the weak ones are exhausted. 

The other route would save many because intense merchandising, 
made possible through large scale producing ownership, would increase 
the consumption of material. 

Some contend that a guaranteed price would invite establishment 
of many more operations, and thus increase production. Possibly so, 
but they would have to be large and efficient, and would require heavy 
investments. They could not be opened up on every 160 acres, with 
small plants, because they could not merchandise nor compete in pro- 
ducing or utilizing. 

The stumpage must get into competent ownerships, which are not 
obliged to realize at once. Small ownerships should pool with larger, 
so that stumpage can be held and not forced upon a market which 



92 FEDERAL TRADE COMMISSION HEARING 

cannot absorb it. The plan outlined above would have a tendency to 
bring about such a condition. 

In 1909 our per capita lumber consumption in the United States 
was 500 feet; in Germany, 48 feet. In 1913 our consumption in this 
country had fallen to 425 feet per capita, and we will show a greater 
decrease, even though we can hold much up by proper selling and 
promoting work. 

One very vital point not generally understood by the public is 
the large item of freight involved in the delivered price of lumber. Lum- 
ber now selling at mills at $6.00 rough, has a freight item of $18.25 
per thousand feet added before reaching Chicago. 

Establishment of Merchant Marine, So That We Can Compete With 

Tonnage Under Other Flags 

Our Marine laws should be amended so that we can compete with 
vessels under foreign flags. 

Our Marine laws should be amended so that we can purchase ships 
anywhere, and operate them under our flag, both off shore and between 
the Pacific and Atlantic Coast. 

Railroad owned ships should be permitted to operate through the 
Panama Canal from coast to coast. 

The manufacturers of the Pacific Northwest are hoping that your 
honorable body will concentrate its efforts upon the export situation 
when the hearing is held in the State of Washington early in August. 

Consideration of the Support British Columbia Gives the Industry. 

British Columbia holds about the same quantity of stumpage as 
the State of Washington. It holds about 60% as much stumpage as the 
State of Oregon. We have no comparative figures showing the stand 
of Cedar in Washington as compared with British Columbia, but in 
Oregon statistics show that there is only 2% of Cedar, while in British 
Columbia there is 34%. Washington has a great deal more Cedar, how- 
ever, than the State of Oregon. These figures are given to show what 
a wealth of Cedar available for shingles is standing in the British Co- 
lumbia forests. 

In 1898, the year following the restoration of the Dingley Tariff, 
exports to the United States on lumber from British Columbia decreased 
60%. The cut decreased from 880 million for the last year of free 
trade to 350 million for the first year of protection. 



E. B. HAZEN 93 

The forest laws passed in Canada March 4 ; 1914, provided that 85 
cents per thousand feet shall be the royalty collected by the Government 
on timber of No. 1 and No. 2 quality in Douglas Fir when cut. Fifty 
cents per thousand feet shall be the royalty on other species. East of 
the mountains it ranges from 50 cents to 65 cents. The royalty is to 
be increased for five-year periods by amounts equivalent to different 
percentages, if any, in the average selling price of lumber over $18.00 
per thousand feet. The rentals in British Columbia are about the equiva- 
lent of the present tax in Oregon and Washington per thousand feet, 
but same are fixed, and are not subject to advances, hence the British 
Columbia Government reasons that with a stumpage cost of 85 cents, 
a selling price of $18.00 for lumber is necessary to sustain the industry. 
In the States of the Pacific Northwest today, Douglas Fir stumpage 
represents an investment of about $2.00 per thousand feet, and must be 
compounded annually at 6%, and the selling price of lumber is from 
$9.00 to $10.50. Much stumpage now owned in British Columbia is 
possessed by men who have paid an advance over the fixed costs, and 
some experts contend that the cost of the log at the mill there is as 
much as on this side. They also contend that the cost of manufacture 
is 20% more. If this is true, and the analyzation of the British Co- 
lumbia Government of their lumber industry were applied to our situa- 
tion, a selling price of $17.00 would be considered necessary on the 
same basis of calculation to net the industry over here, 10% on its 
investment. 

They are bound to continue under free trade to supply the shingle 
business, for they have a great wealth of excellent cedar stumpage. 
They also market large quantities of pulp on this side. For the year 
ending June 30, 1914, 472 million feet of lumber was exported from 
the United States to Canada, while 892 million was exported from 
Canada into the United States. Then the tariff bars were lowered, and 
the first nine months of free trade the imports into this country in- 
creased on lumber 546%, and on shingles, 139%. For the last nine months 
of protection there were thirty million shingles imported through the 
Puget Sound gateway, while for the first nine months of free trade, 
there were two hundred million imported. 

Under our shipping laws, British Columbia can ship to any port 
in the United States in cheaper vessels, with smaller crews, lower wages, 
and can beat us from 20 to 25%. Their rail rates into this country are 
the same as from the Columbia River and Puget Sound districts to 
Eastern points of the United States, and with a water freight of $3.00 



94 FEDERAL TRADE COMMISSION HEARING 

per thousand less to the Atlantic Seaboard they have a decided advan- 
tage. Therefore, on shingles, because of superior quality and larger 
quantity of logs, they have the better of us, and they have also a dis- 
tinct advantage on Atlantic Seaboard shipments on all forest products. 
There seems to be a difference of opinion as to whether or not they 
have an advantage at the present time on lumber cost, however, if they 
have not now, they soon will have, and it will be constantly increasing 
because of their guaranteed stumpage cost, and tax rate as against our 
six per cent compounded interest on actual investment in trees and our 
ever increasing taxes. 



Withholding of Government Stumpage From the Market as Far as 

Possible 

One-quarter of the trees in this Nation are within Government 
reserves. The practice of selling timber to manufacturers on the present 
system where the operator has no large investment in raw material and 
no interest accumulating makes the mill operators under these condi- 
tions the hardest competitiors we have. The system simply places our 
own Government in competition with us. 



Favorable Recommendation of Cooperative Exploitation and Selling 

of Lumber Abroad 

No one company produces sufficient lumber to warrant cost of 
maintaining direct representation, nor of carrying the large accounts 
abroad in all foreign countries. 

Practically all lumber exported from the Pacific Coast today is 
bought by brokers, who are interested only in it as a speculation. They 
do not do creative work in building up demand, but simply fill the 
required demand. It will be necessary for the producer to do the 
market development work. An effort is being put forth now to organize 
a corporation under the title of the Douglas Fir Lumber & Exploita- 
tion Company. It is intended to be a co-operative effort to not only 
sell, but to actively exploit the woods in foreign countries through direct 
representatives. 

A similar plan for marketing the product domestically, if permitted, 
might serve as a solution of our problem, and we would urge your 
consideral ion of this also. 



E. B. HAZEN 



95 



EXHIBIT A 



Table in Part 1, Report Commissioner of Corporations on Lumber 

Industry. Total Standing Timber in Pacific Northwest. 

(In Billions of Feet.) 



Total 

Pacific Northwest 1,512.9 

California 381.4 

Oregon 545.8 

Washington 391.0 

Idaho 129.1 

Montana 65.6 



Privately 
Owned 


Not Privately 
Owned. 
Nat'l All 




Forests 




Other 


1,013.0 


440.8 




59.1 


248.1 


114.4 




18.9 


398.1 


135.8 




11.9 


294.6 


81.6 




14.8 


50.4 


71.0 




7.7 


21.8 


38.0 




5.8 



Douglas Fir constitutes 50% of all above; Western Pine, 15%; Eedwood, 10%. 
No other species as much as 6% of total. 

Heaviest stand of timber is on Pacific slope West of Cascades. 

867 billion feet West of Cascades 
146 billion feet East of Cascades 



1013 billion feet total 

Amount West of Cascades 85%. 

Privately owned timber in whole State of Washington 294.6 

Privately owned timber West of Cascades 270.5 

Privately owned timber in whole State of Oregon 398.1 

Privately owned timber West of Cascades 348.5 

Privately owned standing timber in Oregon and Washington West of Cascades 

by species from table 9, page 72, Part 1 of the Bureau of Corporations on the 
Lumber Industry. 

White Western Sugar 

Fir " Pine Pine Pine 

Oregon West of Cascades. 269.7. 12. 17.5 9.3 

Washington West of Cascades 186.1 ... .2 

Eedwood Cedar Hemlock Spruce All Others Total 

12.2 23.8' 10.1 5.7 348.5 

36.4 32.8 8.6 6.4 270.5 



EXHIBIT B 



Listed 10-hour capacity of sawmills West of Cascade Mountains 

in Washington and Oregon 24,012,000 ft. 

Estimating 24 days a month, 12 months 288 days 

Total yearly capacity, single shift, 10 hours 6,915,456,000 ft. 



96 



FEDERAL TRADE COMMISSION HEARING 






Wash, cut, 1913 4,592,053,000 ft. 

Estimated East of 

Mountains 800,000,000 ft. 



Wash. West of 

Mountains cut 



Oregon cut, 1913 2,098,467,000 ft. 

Estimate East of 

Mountains 250,000,000 ft. 



Oregon West of 
Mountains cut. 



3,792,053,000 ft. 



1,848,457,000 ft. 



Total Wash, and Ore. cut West of Mountains 5,640,520,000 ft. 

Cut less than capacity 1,274,936,000 ft. 



EXHIBIT C 



Cowlitz County 

Assessed valuation and amount of taxes levied for years 1904 to 1913, inclusive. 
Section 3, Twp. 8 N., Eange 1 E., 674.22 Acres. 

Year. Valuation. Amount of Taxes. Eate Mills. 

1904 $ 4,044.00 $ 155.69 38.5 

1905 4,040.00 153.52 38. 

1906 9,480.00 321.37 33.9 

1907 9,480.00 341.28 36. 

1908 31,200.00 748.80 24. 

1909 31,200.00 936.00 30. 

1910 38,720.00 570.96 30.5 

1911 18,720.00 617.76 33. 

1912 18,720.00 580.32 31. 

1913 18,720.00 786.24 42. 

Increase in valuation, 362% ; increase in taxes, 405%. 

For 1914 this section is valued at $16,322.00. Amount of taxes, $661.04. Eate, 
40.5 mills. 

County Cruise— 30,030 M. Fir, good quality; 1,170 M. Cedar; 2,892 M. Hemlock. 

Section 12, Twp. 7 N., E. 2 E., 640 acres. 

Year. Valuation. Taxes. Eate. 

1904 $ 6,400.00 $ 201.60 31.5 

1905 6,400.00 236.80 37. 

1906 12,800.00 357.12 27.9 

1907 12,800.00 396.80 31. 

1908 15,826.00 427.30 27. 

1909 15,826.00 474.78 30. 

1910 21,764.00 642.04 29.5 

1911 21,764.00 605,27 37. 

1912 21,764.00 805.26 37. 

1913 21,764.00 924.97 42.5 

Increase in valuation, 240%; increase in taxes, 260%. 

For 1914 this section is valued at $21,764.00. Amount of taxes, $848.80. Eate, 
39. mills. 



E. B. HAZEN 



97 



County Cruise — 54,410 M. Fir, good quality; 1,405 M. Hemlock. 

Section 8, Twp. 8 N., E. 2 E., 640 acres. 

Year. Valuation. Taxes. Bate. 

1904 $9,600.00 $ 321.60 33.5 

1905 9,600.00 316.80 33. 

1906 9,600.00 306.24 31.9 

1907 9,600.00 297.60 31. 

1908 13,635.00 395.41 29. 

1909 13,635.00 463.59 34. 

1910 34,200.00 1,008.90 29.5 

1911 34,200.00 1,162.80 34. 

1912 30,500.00 976.00 32. 

1913 30,500.00 1,494.50 49. 

Increase in valuation, 217%; increase in taxes, 364%. 

County Cruise — 34,089 M. Fir, good quality; 111 M. Cedar; 2,689 M. Hemlock. 

For 1914 the section is valued at $14,217.00. Amount of taxes, $554.46. Rate, 
39. Mills. 

Pacific County 

Assessed valuation and amount of taxes levied for the years 1904 to 1913, 
inclusive. 

Sec. 27, Twp. 15 N., R. 6 W., 640 acres. 

Year. Valuation. Taxes. Rate. 

1904 $ 2,560.00 $ 112.64 44. 

1905 2,560.00 112.64 44. 

1906 11,520.00 472.30 41. 

1907 11,520.00 430.16 37.34 

1908 17,320.00 406.91 23.5 

1909 17,320.00 665.10 38.4 

1910 15,790.00 615.81 39. 

1911 17,320.00 692.80 40. 

1912 35,175.00 937.41 26.65 

1913 34,765.00 1,303.69 37.5 

Increase in valuation, 1,258%; increase in taxes, 1,057%. 
County Cruise — 

32,787 M. Fir; good quality. 
4,445 M. Cedar; good quality. 
1,308 M. Spruce; short and scrubby. 
925 M. Hemlock; poor quality. 

Lewis County- 
Assessed valuation and amount of taxes levied for the years 1904 to 1913, 
inclusive. 

Sec. 13, Twp. 11 N., R. 4 W. 640 acres. 

Year. Valuation. Taxes. Rate. 

1904 $ 3,420.00 $ 95.96 28. 

1905 3,420.00 106.02 31. 

1906 4,260.00 129.93 30.5 

1907 8,520.00 255.60 30. 

1908 20,370.00 397.21 19.5 

1909 20,370.00 611.10 30. 

1910 16,296.00 513.35 31.5 

1911 20,370.00 587.48 28.84 

1912 20,370.00 672.21 33. 

1913 20.370.00 800.55 39.3 



98 FEDERAL TRADE COMMISSION HEARING 

Increase in valuation, 495%; increase in taxes, 734%. 
County Cruise — 

40,283 M. Fir; good quality. 
8,172 M. Cedar; good quality. 
415 M. Hemlock. 

Sec. 15, Twp. 11 N., E. 4 W. 640 acres. 

Year. Valuation. Taxes. Eate. 

1904 ' $ 6,530.00 $ 182.84 28. 

1905 6,530.00 202.43 31. 

1906 8,130.00 247.97 30.5 

1907 16.260.00 487.80 30. 

1908 27',960.00 545.22 19.5 

1909 27,960.00 838.80 30. 

1910 22,367.00 704.60 31.5 

1911 27,960.00 806.37 28.84 

1912 27,960.00 922.68 33. 

1913 27,960.00 1,098.82 39.3 

Increase in valuation, 328%; increase in taxes, 500%. 
County Cruise — 72,585 M. almost all good Fir. 

Snohomish County- 
Assessed valuation and amount of taxes levied for years 1904 to 1913 inclusive. 
Section 18, Twp. 32 N., E. 9 E. 
(506.78 acres up to 1909 and 568.55 acres — full section, thereafter.) 

Year. Valuation. Taxes. Eate. 

1904 $ 4,800.00 $180.40 37.5 

1905 4,800.00 181.41 37.7 

1906 8,920.00 205.16 23. 

1907 14,070.00 413.66 29.4 

1908 9,130.00 447.22 49. 

1909 12,370.00 324.06 26.2 

1910 12,370.00 554.17 44.8 

1911 12,370.00 455.23 36.8 

1912 12,370.00 444.09 35.9 

1913 12,370.00 616.01 49.8 

Increase in valuation, 129%; increase in taxes, 211%. 

Skagit County- 
Assessed valuation and amount of taxes levied for years 1904 to 1913 inclusive. 
Section 19, Twp. 33 N., E. 10 E., 641.76 acres. 

Year. Valuation. Taxes. Eate. 

1904 $4,217.00 $124.41 29.5 

1905 4,217.00 145.50 34.5 

1906 4,252.00 116.95 27.5 

1907 4,250.00 131.76 31. 

1908 4,660.00 137.55 29.5 

1909 4,660.00 164.04 35.2 

1910 4,675.00 165.99 37.6 

1911 4,675.00 200.55 42.9 

1912 4,675.00 177.60 38. 

1913 4,675.00 229.09 49. 

Increase in valuation, 10%; increase in taxes, 84%. 



E. B. HAZEN 



99 



Whatcom County 

Assessed valuation and amount of taxes levied for years 1904 to 1913 inclusive. 
Section 24, Twp. 37 N., E, 5 E., 640 acres. 

Year. Valuation. Taxes. Eate. 

1904 $ 3,840.00 $103.68 27. 

1905 3,040.00 103.68 27. 

1906 7,040.00 165.44 23.5 

1907 7,040.00 204.16 29. 

1908 22,070.00 430.36 19.5 

1909 22,070.00 551.75 25. 

1910 24,310.00 686.75 28.25 

1911 24,310.00 624.77 25.7 

1912 26,080.00 724.06 27.7 

1913 26,080.00 989.48 38. 

Increase in valuation, 576%; increase in taxes, 862%. 

County Cruise— 11,830 M. Fir; 15,720 M. Cedar; 2,190 M. Hemlock. 



EXHIBIT D 

Chehalis County- 
Comparative statement showing valuation and percentage of assessment on each 
class of property as equalized for the years 1908, 1910, 1912 and 1914: 

1908. 1910. 1912. 

Valuation. Percent. Valuation. Percent. Valuation. Percent. 

Timber lands 7,374.949 49.33 8,874,712 47.19 15,718,118 47.38 

Other unimproved lands 516,845 3.46 886,756 4.71 1,710,227 5.15 

Improved lands, inel. 

improvements 352,884 2.36 428,395 2.28 1,912,230 5.77 

City and town lots, incl. 

improvements 3,566,412 23.85 5,345,122 28.42 7,287,600 21.97 

Personal property 2^173,130 14.54 2,405,320 12.79 3,401,643 10.25 

Public service corpora- 
tions (railways, st. 
rys. and telegraphs) 966,298 6.46 866,996 4.61 3,144,958 9.48 

Totals 14,950,518 18,807,301 33,175,776 



Chehalis County 

Valuations and percentage, as equalized. ■ 

1914. 

Valuation. Percent. 

Timber lands 20,743,593 49.52 

Other unimproved lands 1,203,697 2.88 

Improved lands, including improvements 2,707,216 6.47 

City and town lots, including improvements 7,875,922 18.80 

Personal property ' 5,479,960 13.08 

Public service corporations (railways, st. railways and telegraphs. 3,876,272 9.25 

Total 41,886,660 



100 FEDERAL TRADE COMMISSION HEARING 



EXHIBIT E 

The following statement, subject to the notes appended, gives the 
results of a study by representatives of the Forest Service of the cost 
of delivering logs into Puget Sound. This work is part of the gen- 
eral study of the lumber industry of the Pacific Northwest which is 
being made by the departments of Agriculture and Commerce. Co- 
operation on the part of the industry, without which nothing of this 
kind could have been done, was courteously extended and is heartily 
appreciated by the Forest Service. 



Average Cost of Delivering Logs from Tree to Puget Sound 

(Embodying the figures from twenty camps.) 

Output (1913) and Investment. 

Percent of total output (approximate) 75% 

Average year 's output per camp 45,000,000 ft. 

Average day 's output per camp 200,000 ' ' 

Average fixed investment $140,000 

Average working capital 35,000 

Average labor cost per M. ft 3.09 

Cost per M. ft. Log Scale. 

1. Felling and bucking, labor $ .683 

2. Woods to car, labor 1.259 

3. Eailroad (spur) and pole construction, labor .586 

4. Train crews, labor .206 

5. Dumping and rafting (includes contract work) .211 

6. Supplies and maintenance (labor and material) of railroad, dump 

and boom .177 

7. Supplies and maintenance (labor and material) of equipment, 

tools, buildings, etc .307 

8. Fuel of locomotives, logging engines, shops, etc .239 

9. Wire rope .137 

10. Depreciation, equipment .24 

11. Depreciation main line railroad grade, boom and buildings .066 

12. Sealing .049 

13. Eeturn of boom sticks .046 

14. Log freight .882 

15. General expense: 

Salaries and commissions $ .139 

Taxes 029 

Industrial insurance 096 

Sundry expenses 076 .340 

Total average cost per M. log scale $5.42S 



E. B. HAZEN 101 

This statement does not include the cost of stumpage, interest of 
any kind, discounts on logs sold, towage to mill, or taxes on standing 
timber. It is intended here to include only the cost of transforming, 
transporting, and sorting the logs, taking them to the point of sale 
for straight loggers. Stumpage and the taxes on timber will be handled 
in another section of the work. Discounts have been looked on as 
more closely related to realization than to cost of logging. Interest, 
whether on capital invested or on borrowed money, complicates the 
matter of cost and is most clearly considered as related to profit. 

The classification of costs given in the statement should not be 
looked on as ideal. It is in fact an expedient. In collecting the data 
the classification of the companies was followed of necessity; later, in 
compiling the figures, they were thrown into the best groups that 
could be made. The main purpose was to arrive at an average total 
cost figure. This the segregated figures will serve to illuminate. 

The aim was to make the statement self-explanatory, but brief 
additional explanation seems to be required. This will be clearer for 
a brief statement of the transportation relations of the camps. 

The average haul by railroad to water is 23 miles, while 4 is the 
minimum. A few of the concerns have their own railroads reaching 
to point of delivery in the Sound, but most logs are hauled for a longer 
or shorter distance on common carrier railroads. Items 4, 11, and 14, 
with others in less degree, are materially affected by this fact, are of 
doubtful value when taken separately, and comparison of any one 
camp's cost with the average would have little point. 

The term " Salaries" refers to the pay of Superintendents and 
that of bookkeepers, etc., at main offices detached from the woods. Fol- 
lowing the practice of many camps, the pay of foremen, camp book- 
keepers and scalers, time keepers, and other general help is thrown 
pro rata into the cost of the major operations, falling and bucking 
spur construction, etc., and it is also included in total labor cost. 

Item No. 2 includes the labor cost of yarding, roading, loading, 
moving engines, running out lines, building landings, pumping water, 
etc. 

Number 3 includes the cost of building spur railroads, and the 
small amount of pole roads employed in this region. In some cases 
all the railroad used is taken care of under this heading, or as in operat- 
ing expense. This has the effect of increasing this item above the nor- 
mal charge and decreasing Classification No. 11. Item 3 was a hard 
cost to take care of for the additional reason that in some cases the 



102 FEDERAL TRADE COMMISSION HEARING 

costs from year to year varied greatly due to varying conditions in the 
"shows," to the time the work was done, and the method of account- 
ing. Where this condition was found it was necessary to use a figure 
representing the average cost for several years rather than the cost 
for one year. 

Number 5 includes the cost of sorting and rafting the logs, and 
some of the figures on which the cost was based include the cost of 
unloading. As a general thing, in fact, the cost of unloading is included. 
Over one-half of the amount given in the classification was paid to 
boom companies who do the work at a fixed rate per M. feet, the bal- 
ance representing the amount paid to labor by the logging or lumber- 
ing companies. 



EXHIBIT F 

NET AVEEAGE SELLING PEICES 

Beports from Six Cargo and Kail Mills. 

(Cost of selling, commissions, discounts, etc., deducted from gross selling prices, 
giving net figures here.) 

1910. 1911. 1912. 1913. 1914. 1915. (6 months) 

14.30 12.35 13.21 13.64 11.18 10.90 

Cost of logging (composite statement) $ 5.43 

Cost of manufacturing (composite statement) 5.06 

Towage estimated 25 

Total producing cost $10.74 

NET AVEEAGE SELLING PEICES 

Beports from Six All Bail Mills. • * 

(Cost of selling, commissions, discounts, etc., deducted from gross selling prices, 
giving net figures here.) 

1910. 1911. 1912. 1913. 1914. 1915. (6 months) 

14.45 12.78 13.69 12.73 11.29 10.06 

Cost of logging (composite statement) $ 5.43 

Cost of manufacturing (composite statement) 5.66 

Total producing cost $11.09 

Interest on plant, equipment, capital and stumpage and taxes on 
stumpage not included in above cost figures. Also no stumpage included. 



E. B. HAZEN 103 

EXHIBIT G 

Report on Composite Statement of the Cost of Manufacturing Lumber 
Compiled for West Coast Lumber Manufacturers Association 

John G. McIntosh, Certified Public Accountant 
844 Henry Building, Seattle, Wash. 

Seattle, Wash., February 27, 1915. 

The following comprises my formal report on the Composite State- 
ment of the Cost of Manufacturing Lumber, compiled in pursuance of 
instructions of a committee of the West Coast Lumber Manufacturers' 
Association. 

Requests for cOst figures for the year 1913 were sent to 66 mills, 
on a list supplied by the Association's manager. The request in each 
case was accompanied by a copy of the "Plan of Obtaining a Com- 
posite Statement of the Cost of Manufacturing Lumber." This in- 
cluded a form of cost statement with explanations showing the par- 
ticular expenses to be included in each item of the cost, together with 
forms prepared especially to facilitate rearranging or redistributing 
the cost accounts of the various mills on a uniform basis. 

28 mills contributed statements. The failure of the other 38 mills 
to do so was undoubtedly owing in most instances to pressure of regular 
office routine making it impossible to revise the old cost accounts to fit 
the uniform statement. 

The committee authorised the auditing of the statements received. 
It was found inadvisable to check eight of them, for the following re- 
spective reasons: 

(1) Would require some checking at San Francisco. (2) None 
of present office force was employed in 1913, and they being 
unfamiliar with the cost accounts of that year it was felt that an audit 
of the statement might consume too much time. (3) Did not operate 
in 1913, but their offer to furnish complete figures for the first half 
of 1914 was accepted. It was, however, found undesirable to incorporate 
1914 figures in a 1913 composite statement. (4) Had a very short 
run in 1913. (5) Statement was submitted on company's own segre- 
gation, which differed materially from that of the uniform statement. 
(6) Statement was not sufficiently complete to warrant checking. (7 
& 8) Did not consent to examination of the books. 

The remaining 20 statements were checked in co-operation with 
the Forest Service, and were combined in compiling a composite state- 



104 FEDERAL TRADE COMMISSION HEARING 

ment. In this formal report the composite statement (after making 
some adjustments assented to by Mr. Cary, of the Forest Service) is 
separated into two parts shown on the following page — one represent- 
ing mills that ship by rail and the other representing mills that ship 
both cargo and rail. If you furnished a statement, and it was audited, 
your individual averages are shown for comparison under the heading 
' -Your Mill": 

Composite Statements of the Cost of Manufacturing Lumber 

Embodying the figures of 20 mills in "Washington and Oregon for the year 1913. 

Cargo 
Kail Mills. Your Mill. and Kail Mills. 

Total cut 250,253,916 ft. 441,066,295 ft. 

Average cut per mill 25,025,391 ' ' 44,106,629 ' ' 

Total days run (inel. night shifts 2,540.5 3,289.8 

Average days run per mill 254. 329. 

Average cut per day per mill 98,499 ft, 134,076 ft. 

Total number of men, day shift only. . 1,244 2,004 

Av. number men per mill, day shift only 124 200 

Av. wages per day $2.76 $2.68 

Percentage of output surfaced 78% 44% 

COST. 

Cargo and 
Rail Mills. Your Mill. Kail Mills. 

Avg. per M. Avg. per M. Avg. per M. 

Boom labor $ .059 $ .064 

Boom repairs and supplies 014 .011 

Mill labor ."~ 1.463 1.416 

Mill repairs and supplies 593 .540 

Total boom and mill $2,129 $2,031 

Planer labor 590 .393 

Planer repairs and supplies 124 .087 

Kiln labor 192 .162 

Kiln repairs and supplies .019 .011 

Total planers and kilns .925 .653 

Yard labor 1.143 1.112 

Yard repairs and supplies 113 .181 

Total yard 1.256 1.293 

Total direct operation $4,310 $3,977 

Salaries $ .358 $ .286 

Sundry expense 180 .123 

Industrial insurance 082 .073 

Fire insurance 168 .125 

Taxes 079 .083 

Total general expense .867 .690 

Depreciation .480 .397 

Total manufacturing cost. . . . $5,657 $5,064 

Interest on plant at 6 per cent .410 .434 

Interest on lumber stock 202 .119 

1 1 1 forest on log stock 069 .069 

Interest on accounts receivable 092 .063 

Interest on current cash 017 .017 

Total interest on working capital 

at 6 per cent .380 .268 



Total cost with interest $6,447 $5,766 



E. B. HAZEN 105 

In considering the foregoing figures, the following comment should 
be borne in mind: 

Cost of Logs and Cost of Selling are not included, excepting that 
Salaries and Sundry Expense cover the usual handling of sales in the 
office. The cost of commissions, separate sales offices, traveling sales- 
men, etc., is excluded. The Yard cost absorbs the handling of lumber 
sold at retail, the extra cost of which is small in a composite statement. 

Lost accounts, which were not included in the cost, averaged 6y 2 c 
per M. on the cut for the rail mills and 5c per M. for the cargo and 
rail mills. This included losses on local or retail sales for both classes 
of mills. It may be that there were further losses in the latter class, 
on accounts transferred to San Francisco. 

Shipping expenses not common to all the mills have been excluded, 
such as scow rent and towing, switching to main line of railroad, etc. 

Interest. To the "Manufacturing Cost" there is added the cost 
of the use of the money tied up in plant, logs, lumber, customer's ac- 
counts, etc., after allowing for amounts owing for pay-rolls, logs, and 
supplies. The portion of this money which is supplied by the stock- 
holders might be invested in interest-paying securities if it were not 
laid out in the saw mill business, and the portion which is borrowed 
requires a direct cash expenditure for its use (interest). Therefore, 
while technical accounting would exclude interest from the manufac- 
turing account, it is in fact a cost of conducting the business and is 
here shown in the cost per M. feet of lumber cut. The rate of 6% 
is used in the statement, though money to carry stock and accounts 
costs 7% and 8%. 

It will be noted that for convenience the rate per M. for inter- 
ests on logs and cash is the same for all of the mills, though the cargo 
shipping mills probably require a larger stock of logs per M. for their 
orders than do the rail mills. 

Shut-downs and Night-runs. It will be observed that the average 
run of the rail mills furnishing statements was 254 10-hour days, and 
of the cargo and rail mills 329 10-hour days. The former class in- 
cluded the shortest run of all of the mills, and the latter class, so far 
as the data at hand indicates, included all of the night-runs. 

Obviously the average cost per M. for General Expense and In- 
terest on Plant is increased by shut-downs and reduced by night-runs. 
A comparison of costs should take this into consideration. Deprecia- 
tion is affected similarly, unless based on the quantity of lumber cut. 

Increase and Decrease of Stock on Hand. The cargo and rail 



106 FEDERAL TRADE COMMISSION HEARING 

mills that furnished statements, cut approximately 20,000,000 feet more 
than they shipped. Since that portion of the year's cut would still 
have to be disposed of at the expense of subsequent operations, there 
should be added to the 1913 cost enough to cover handling, running 
through planers, etc., on the quantity of lumber unshipped. How much 
of it would require surfacing is a question; but to cover surfacing, 
handling, etc., there probably should be added to the above figures say 
5c per M. on the total cut. This additional cost is of little importance 
in the composite figures; but mills comparing their individual state- 
ments with them should make due allowance for the disposal of any 
considerable increase or decrease of their stock on hand in the year 
1913. This applies, of course, to the rail mills also, though their com- 
bined net increase of stock was only 700,000 feet. All expenses, includ- 
ing yard and planers, have been divided by the whole cut in arriving 
at the average costs. 

Shingle Cants. In cases where the saw mill turned shingle cants 
over to a shingle mill, the displacement of lumber cut due to the shingle 
cants was determined as carefully as possible, based on information 
supplied by the mill, and the displacement so found was added to the 
apparent lumber cut and the yard cost adjusted accordingly, for the 
composite statement. 

Surfacing. In most cases it was necessary to estimate the per- 
centage of output surfaced, by tests of the sales, owing to inadequate 
records or unreliable planing mill reports. 

Number of Men and Average Wages. This information cannot 
be reconciled with the other figures of the statement, owing to night- 
shifts and adjustments previously referred to. 

Cost Figures from Additional Mills. It seems probable that the 
Government, i. e., the Forest Service, will continue the work of obtain- 
ing costs. If it does, a finer classification of the mills — a larger number 
of composite statements — may be made possible. The rail mills might 
be divided into three classes with respect to their capacities, say small, 
medium and large. The cargo-shipping mills also might be classified, 
sepaiating from the others those that ship little or no lumber by rail. 
Any composite statements, however, would have to guard against the 
exposure of any mill's figures without its consent. 

Cost Segregation. Following is a brief outline of the cost that is 
included in each item of the statement: 

Boom Labor. Handling the logs after they are delivered in the 
mil] boom, including delivery to the log haul. 



E. B. HAZEN 107 

Book Repairs & Supplies. Labor and materials used in repairs, 
supplies and small tools. Where found, the use of boats in shifting 
logs has been included. 

Mill Labor. Hauls logs into mill and places lumber onto trucks 
from sorting chain. Includes power and portion of watchman's time. 
Millwrights are excluded, they being included in Mill Repairs and 
Supplies. 

Mill Repairs & Supplies. Millwrights and other repair-labor. Re- 
pair material and all supplies. Includes power repairs and supplies. 

Planer Labor. Takes lumber from trucks ; surfaces, grades, ties 
and reloads it on trucks. Includes planers in saw mill, and power 
labor. 

Planer Repairs & Supplies. Labor and material for repairs ; sup- 
plies, including twine. Includes power repairs. 

Kiln Labor. Loads kiln trucks, passes them through kiln, and 
unloads unless the kiln trucks are unloaded directly by the planer crew. 

Kiln Repairs & Supplies. Labor and material used in repairs. 
Should also include cross-sticks used in piling lumber on trucks, but 
very few mills take account of this expense. 

Yard Labor. Includes labor of transportation, piling, handling in 
sheds, loading, operation of cranes, etc. Broadly speaking, it covers all 
handling outside of the mill, kiln and planers. 

Yard Repairs & Supplies. Labor and material used for repair of 
yard, wharf, sheds, etc. Includes use of horses, without teamsters. 

Salaries. Administrative and office salaries, less allowances for log- 
ging and other departments. 

Sundry Expenses. Covers office supplies, association dues, legal ex- 
pense, donations, incidental traveling expenses, etc. 

' Industrial Insurance. Covers premiums, assessments, payments to 
injured, etc., excluding lath mill. 

Fire Insurance. On plant, lumber, etc., excluding residences, 
stores, etc. 

Taxes. On real and personal property directly connected with the 
manufacture of lumber. Excludes taxes on logging equipment, resi- 
dences, stores, etc. 

Depreciation. Depreciation in this statement is practically a com- 
posite figure of the depreciation found on the mills' books. The basis 
in some instances is a percentage of the plant value, in others is a lump 
sum, and in still others is a rate per M. feet of lumber cut. The ques- 



108 FEDERAL TRADE COMMISSION HEARING 

tion of a proper charge for depreciation in the composite statement 
is still open for consideration. 

Repairs. It is probable that some repair-labor has been included 
in the operating-labor accounts, particularly in the yard, where the 
time of men making repairs is not always separated from the operat- 
ing labor. In some instances it was found that planking, spikes, etc., 
used in yard repairing had not been charged on the books. 

The undersigned wishes to express, in this report, his apprecia- 
tion of the hearty co-operation, and the freedom of access to confidential 
records, accorded him by the mills whose statements were checked. 

Respectfully submitted, 

(Signed) John G. McIntosh, 

Certified Public Accountant. 



EXHIBIT H 

Mr. Hazen: Have you any questions you would like to ask, 
gentlemen? 

Mr. Keith: I would like to ask you, Mr. Hazen, if the per capita 
consumption of lumber has fallen off 50 feet per capita, if it will not 
have a tendency to extend the life of the property and to increase the 
interest cost of carriage of the timber? Have you ever considered 
that? 

Mr. Hazen: Did I understand you to say that it had fallen off 
50 per cent? 

Mr. Keith: No, 50 feet per capita. 

Mr. Hazen: Ten per cent. 

Mr. Keith: I would like to ask if you have made some figures 
showing the increase in cost of stumpage purchased in 1890 to date. 

Mr. Hazen: Yes, I made a calculation based on $2.50 an acre 
for stumpage, our timber running about 50,000 to the acre on the 
coast, making 5 cents, which was the original price at which the timber 
passed from the government in 1890. I had that compounded up to 
1915 at 6 per cut, and added one per cent for taxes and one per cent 
lor administration, and I found that that stumpage today would stand 
the owner it' there were any such, and I don't know of any operators 
who have any stumpage that has cost them as little as that— but it 
would stand them 34 cents and they could sell their lumber for the 



E. B. HAZEN 



109 




110 FEDERAL TRADE COMMISSION HEARING 

next 20 years and carry that load at about a fixed price. Whereas, 
the average stumpage owned on the Pacific Coast I took at $1.50, 
which was the valuation put on it by the Government report, and I 
had that compounded up to 1915, and the selling price at the end of 
20 years must be $18.00, and it must be $13.00 today to carry that 
burden. 

The Chairman: How much today did you say? 

Mr. Hazen: It must be $13.00 today and about $18.00 in 20 years. 

Mr. Keith: Are you speaking now of the selling price of lumber 
or the selling price of timber? 

Mr. Hazen: I am speaking of the price that must be secured for 
lumber without figuring any operating profit, just the 6 per cent 
proposition. That lumber must increase from $13 to $18 to carry 
the load at 6 per cent. 

Mr. Keith: Another question I would like to ask you, Mr. Hazen, 
is this : You made a statement here that 15 to 25 per cent of the tree 
was left in the woods. I would like to know how low you cut your 
stumpage; what is the basis of the diameter? 

Mr. Hazen: "We cut it down to ten inches. 

Mr. Keith: Down to ten inches? 

Mr. Hazen: Yes, sir. 

Mr. Keith: That is all I have. 

Mr. Downman: Any questions from the Commission? 

The Chairman: No further questions, Mr. Downman. 

Mr. Downman: The next gentleman on the program is Mr. 
M. B. Nelson, whom we brought here to try to throw some light on the 
export business from the standpoint of yellow pine operations. Mr. 
Nelson is with the Long-Bell Lumber Company, Kansas City, Mo., 
which maintains a selling organization, or did previous to the war, 
in Hamburg. 



STATEMENT OF MR. M. B. NELSON 

Mr. Nelson: Mr. Chairman, and gentlemen: I came on very 
short notice, so I have not prepared my paper, and am afraid my 
remarks will be somewhat rambling. 

Some ten years ago we had then been doing in a small way a 
little export business in yellow pine, which was not to our satis- 
faction, and we began to make some investigations to see if we could 



M. B. NELSON 111 

not better our method of selling. Our sales at that time were being 
made by what we might call " office-in-the-hat agencies" that really 
had little responsibility and were kind of speculators and had no in- 
terest in the consumption of our lumber, and had no timber invest- 
ments. 

We counseled with a number of southern operators to see if we 
could not formulate a selling company which could put salesmen in 
the different foreign markets who would be familiar with the method 
in which our lumber is manufactured and the way the tree grows 
and how it could best be sold for our interests. "We were encouraged 
at first and had quite a large number of the large operators who 
were willing to join us in this, but when we came to draw up papers 
and incorporate, and submitted our proposition to our attorneys, 
they would not approve of it, because they were afraid that it might 
be construed as in conflict with the Sherman Act. So we abandoned 
that plan and some two or three years later, having so much trouble, 
I made an investigation of the European markets where most of our 
lumber was going to that we were exporting, and after doing so I con- 
cluded that with our nine mills we would have a nest egg, so to speak, 
to start with abroad and to operate in a limited way by establishing 
our selling force on the other side. 

We therefore established an office in Hamburg and put in charge 
of that office a man who was familiar with our operations, and 
through some salaried salesmen and agents that he could keep in close 
touch with, we succeeded in developing a market for quite a number 
of items of stock that we had never been able to sell to that trade 
before. 

I might say that our reason for wanting to establish this selling 
organization was that I found that the man who sold our lumber 
over there knew nothing about a yellow pine tree, knew nothing 
about a sawmill, or why we could manufacture one item cheaper than 
another or anything about it. Hence, it as a rule went through three 
or four hands before it came to us, and it was, I might say, really 
just a conglomerate mass, and in order to get intelligence there we 
would waste too much energy through the different offices and chan- 
nels through which it passed. Therefore, as I say, we developed 
through our own operations in a limited way sales for quite a lot of 
lumber that we would not have had if we had pursued the old 
methods ; and what we accomplished in that line in the about two and 
a half years that we operated prior to the war, made it clear to me 



112 FEDERAL TRADE COMMISSION HEARING 

that much more could be accomplished if our selling energy was 
concentrated through one channel, and we established competent, ex- 
perienced men in the different markets where yellow pine could be 
consumed, and developed the business along practical lines. If we 
could secure in some way permission to organize so that we could 
send the proper organization throughout Europe, South America and 
the "West Indies, in fact, every market where yellow pine is used, with 
that object in view, and the expending of all of our energies in the 
one direction, I think we could, in the course of five years under nor- 
mal conditions, double the sale of our product. 

My reason for that is this : I found, or we found, rather, that a 
number of markets were buying lumber from the Baltic district — 

The Chairman: The Balkans? 

Mr. Nelson: The Baltic district, what is called the Baltic dis- 
trict, that is, in Norway, Sweden and Russia. They had been accus- 
tomed to buying from that section, and take England, for instance, 
they are slow to change, much more so we found than Germany 
and Holland; but if we had someone that could put the information 
before them in a convincing manner they could be induced to use our 
yellow pine and our American woods. 

Take box shooks; I think they could be introduced to a very 
large extent; and a lot of shorts that are used for various purposes, 
for crating and boxing and for different uses, could be introduced 
also. 

Now, as to South American consumption, I am not so familiar 
with conditions in that territory, but I am sure that the sale of it 
if intelligently handled would develop a demand that we do not 
now have. 

I do not know, gentlemen, that I have anything further to offer. 

Mr. Downman: Are there any questions which the members 
of the Commission would like to ask of Mr. Nelson? 

Commissioner Rublee: Mr. Nelson, you stated that you created 
a selling agency for your own business in Hamburg? 

Mr. Nelson: Yes, sir. 

Commissioner Rublee: I was not quite clear as to what the diffi- 
culties were that you described, as to why it did not work perfectly 
well. 

Mr. Nelson: Well, we have nine mills, and of course it gives us 
quite a large .output. 

Commissioner Rublee: Yes. 



M. B. NELSON 113 

Mr. Nelson: In the case of a smaller operator, or even confined 
to the production of onr own mills, the expense of even maintaining 
a direct selling agency over in that country would be too great to 
warrant it unless the different mill operators would get together and 
sell through one organization, so as to give them a large amount of 
stock. 

Commissioner Rublee: Was it too great for your organization? 
That is to say, was the expense too great for your organization? 

Mr. Nelson: It would have been if confined to our own mills 
alone, but we bought considerable stock from neighboring mills. 
When we would take an order larger than we could handle our- 
selves, why, we would purchase what we could not furnish ourselves 
from outside mills, so in that way we considered the proposition profit- 
able. But I would not consider it so for small operations. 

The Chairman: Did you find it satisfactory for your organization 
of nine mills ? 

Mr. Nelson: Confined to them alone we would not, no, sir; but 
by buying some from the outside we were able to make it so. 

The Chairman: In your experience, what would you anticipate 
that the conditions would be as to the lumber market abroad at the 
conclusion of the war? 

Mr. Nelson: What will the conditions be? 

The Chairman: Yes, as affecting your lumber market. Do you 
expect an increase in demand? 

Mr. Nelson: That will depend a good deal as to how long the 
war lasts, and the conditions of those countries financially over there, 
and physically, I might say, after the war is over. Should the war 
terminate . before they are bankrupt or physically exhausted, there 
will, of course, be opportunity to dispose of a great deal of lumber 
for building up the destruction that has been caused; but if they 
kill off their active people and become bankrupt, it would be a ques- 
tion as to what we could do. 

The Chairman: Generally, speaking, do you expect an increase 
in the market demand after the war? 

Mr. Nelson: After the war? 

The Chairman: Yes. 

Mr. Nelson: Yes, sir, we do; not as much as we had before the 
war, but an increase over what the demand is now. 

The Chairman: Is there any demand now? 

Mr. Nelson: Very little. What demand there is it is extremely 



114 FEDERAL TRADE COMMISSION HEARING 

difficult to secure vessels to move. For instance, we have at Port 
Arthur now between ten million and eleven million feet of lumber. 
Some of it was shipped down there on orders we received last No- 
vember with the understanding that we were to have pay for it within 
thirty days after shipments arrived there, and they are now paying 
storage on a lot of it at 25 cents a thousand feet, because they cannot 
secure tonnage to move it. 

Mr. Keith: Mr. Nelson, were not lumber conditions in the Euro- 
pean market shortly before the declaration of war very much de- 
pressed? 

Mr. Nelson: Yes. During the latter part of 1913 and the first 
half of 1914 it was about 80 to 85 per cent normal. 

Mr. Keith: I would like to ask you also, Mr. Nelson, if the 
business of this country was normal, what percentage of the logs, 
yellow pine logs, could be economically manufactured for shipment 
abroad, in your judgment? 

Mr. Nelson: If you use South America and the West Indies and 
all of the export markets that are open to us to be properly developed, 
I think the entire production could be utilized. The European market 
before the war took only the higher grades, while the lower grades 
went mainly to the West Indies and South America. 

Mr. Keith: Did not South America get most of its supply from the 
Baltic regions? 

Mr. Nelson: No, not South America. 

Mr. Keith: It did not? 

Mr. Nelson: No. 

Mr. Keith: The point I want to bring out, Mr. Nelson, is that 
taking your present operations or your operations prior to the declara- 
tion of war in Europe, the sales there were rather limited just prior 
to the war? 

Mr. Nelson : Yes. 

Mr. Keith: Not as broad as you would like to have carried 
them out? 

Mr. Nelson: No, it was very limited and our organization was 
new. 

Mr. Keith: And you think it could be extended by co-operation 
of a larger number of plants through their combining together and 
forming an export company? 

Mr. Nelson: I feel sure it could, because the methods of selling 
our material in that country at the present time are very crude. 



M. B. NELSON 115 

A lot of energy is wasted for which no one receives any benefit. 
It is the lack of intelligence upon the part of the people who are 
selling as to what they could get or what they can get. For instance, 
a buyer over there forms an idea that he wants a certain size or certain 
grade. Now, he does not know how difficult it is to secure that grade. 
The result is he makes an inquiry of some local dealer.' That local 
dealer sends the inquiry to the importer. The importer sends that 
inquiry, as a rule, to a general agent, say in London or some large 
place, and he in turn sends that over to what we call a local exporter 
over here. Then the local exporter goes to the mill with that inquiry 
to buy. Now, notice the number of officers and people that goes 
through. 

The mill man might ask him about it, but he does not know what 
it is going to be used for, that is to say, the local exporter does not. 
The mill man might ask him, "What is it going to be used for," and 
he replies, "I don't know," and simply says, "This is how it was put 
up to me," and so it is up to the mill man to make a price on that 
item. There is no going to that buyer and making him a price on 
something else than what is inquired for. 

The thought I have in mind is that if we had a man there who 
could go to this buyer or user of lumber and talk with him and ask 
him what it Avas going to be used for, and then explain to him what 
he could get, and the grade that he could get so much cheaper and 
that would also be cheaper for us to make and more profitable for 
us to manufacture, why, if we had an organization of that kind we 
could accomplish a great deal, and, as I say, we could work up a 
trade for a lot of lumber which is now really going to waste in this 
country. 

I might add that we have an agent who is not a salaried repre- 
sentative, who is simply on a commission basis, and who has been 
over in this country now for some two or three months at our mills. 
He spent about two months in the Baltic region in Russia, with a 
view after this war is over of being familiar, as I have said, with his 
own trade, and understanding his own timber that he is selling, so 
that he will know better how to sell our lumber after the war. 

Mr. Keith: Do you know of any request being made on the 
Southern pine people from the Spanish American countries for copies 
of their grading rules? 

Mr. Nelson: Yes, there has been some inquiry about the grading 
rules. 



116 FEDERAL TRADE COMMISSION HEARING 

Mr. Keith: What do you know of the effort being made in the 
South for the exploitation of trade extension by the Southern people ? 

Mr. Nelson: "Well, our Southern Pine Association is spending, as 
I understand, approximately a quarter of a million dollars a year in 
scientific research and in different ways to try to increase the con- 
sumption of our lumber. And it is spent in different ways, adver- 
tising and experimental work, and doing some educational work. 

Commissioner Hurley : To what extent do you think that you can 
increase the foreign business if you advertised and had a foreign 
co-operative selling company? 

Mr. Nelson: To advertise, I do not think we could accomplish 
anything practically. To have an organization such as I have men- 
tioned, as I stated, I think inside of five years under normal con- 
ditions we could double the consumption of Southern pine in foreign 
countries, where we are now doing business. 

Commissioner Hurley : . Who are your chief competitors now out- 
side of Canada — Norway and Sweden? 

Mr. Nelson: Norway, Sweden and Russia. There is some comes 
from the Balkan States, but their competition is not as great as from 
what is called the Baltic district. 

Commissioner Hurley: Then your thought is to offset this de- 
crease in your business and provide for the substitutes that if you had 
a co-operative selling organization for foreign trade it would help 
to increase your output and bring money into this country? 

Mr. Nelson: Yes, sir, it would relieve our conditions to that ex- 
tent. It would bring in just that much more money which we do not 
now have, and it would develop the market and the demand for some 
of our low grade stuff, really, which is going to the burner or being 
left in the woods at the present time. 

The Chairman: Was it contemplated that the chief function in 
that organization which you put up to your attorneys would be to 
formulate a selling agency or to fix prices abroad to sell your product? 

Mr. Nelson: Well, naturally to sell you have to fix the price, 
you and your customer have to fix it, and as it is now, the customer 
fixes the price. 

The Chairman: Do you think it would be feasible to organize 
a selling agency abroad to exploit or market abroad and to prevent 
those things that the law now prohibits in this country, to wit, fixing 
prices, at the same time, or would one lead to the other? 



M. B. NELSON 117 

Mr. Nelson: Necessarily one would lead to the other, I think. 
You must fix the price of your product, if I understand you cor- 
rectly, otherwise you cannot sell it, and while an organization of this 
kind if created probably would not — you could not get more than 
thirty to forty per cent probably of the manufacturers to sell their 
lumber through this organization, because there would be opposition 
to it in some ways, and they would figure that some of the operators 
would be benefited more than they would, and for various reasons I 
do not think it would be possible to get over about forty per cent 
of the export production into a selling company of this kind. 

The Chairman: The point I was directing my question to was this : 
It has been urged as an objection to co-operation in the foreign trade 
that it would lead to the fixing of prices to the detriment of the 
consuming public in this country, which the law now prohibits, and 
which is generally considered proper. 

Mr. Nelson: No, I do not think it would affect it in the least. 

The Chairman: You do not think it would necessarily follow? 

Mr. Nelson: No, sir. 

The Chairman: We are very much obliged, Mr. Nelson. 

Mr. Downman: Mr. Chairman, I presume we have about arrived 
at the lunch hour, but before you adjourn — 

The Chairman : Have you other gentlemen here so that you could 
continue ? 

Mr. Downman: Yes, we will continue as long as you wish. 

The Chairman: Suppose you continue for half an hour and see 
how far we can get. 

Mr. Downman: The next gentleman is Mr. H. C. Hornby. 

The Chairman: How much time do you estimate you will wish 
now, Mr. Downman? 

Mr. Downman: To complete the presentation? 

The Chairman : Yes. 

Mr. Downman: "Well, it will take about an hour and a half, 
possibly. 

The Chairman: Then we can adjourn now and resume at what 
time ? What would suit your convenience ? 

Mr. Downman : It is up to you. 

The Chairman: Suppose we resume at two o'clock sharp. 

Mr. Downman: Well, with that understanding, if I can present 
one man now, it will take but a minute. He just wants to make a small 
statement. I made the statement yesterday that Mr. Toole, of what 



118 FEDERAL TRADE COMMISSION HEARING 

is known as the Inland Empire, Montana, Idaho and Washington, and 
that section which has not been represented here, is unable to be here, 
and the conditions are very bad out there, and Mr. Hornby just 
wants to make a statement as being a representative from that dis- 
trict. 

The Chairman: You may take your own time, and we can post- 
pone the adjournment until 2 :15. 

Mr. Downman : Mr. Hornby. Gentlemen, this is Mr. H. C. Hornby 
from Cloquet, Minnesota, who is interested in lumbering in the Inland 
Empire. 

STATEMENT OF MR. H. C. HORNBY 

Mr. Hornby: Mr. Chairman and gentlemen, Mr. John R. Toole, 
the President of the "Western Pine Manufacturers Association, was 
to present the conditions as prevailing in the Inland Empire or Spo- 
kane district, but I understand Mr. Toole is detained by sickness. 
No one here has the necessary data or figures to properly present the 
conditions in that district to this Commission. As one interested 
in the manufacturing of lumber in that territory, I know that the 
conditions there are deplorable. Lumber is being- sold for less than 
the cost of production, and unless conditions change very materially 
for the better within a very short space of time, there will only be 
a very few operators in the inland territory that can continue. There 
are several features that aggravate the local situation which are 
probably more than in other districts. 

The territory in which the timber grows is rough and mountainous 
and the cost of logging is high. There is no large lumber using terri- 
tory that can be reached without a heavy freight rate, which cuts 
them off from almost all consumption, on the long freight rates, with 
the exception of white pine, which is less than thirty per cent of the 
total stand of timber in the territory, and a portion of the output 
of western pine. The balance of the product, which runs very closely 
to 65 per cent, is all low grade and there is no local territory that can 
absorb this surplus. The country is new and the development of it 
is calling for a large amount of funds of which the lumbermen have 
to pay a goodly share. The fire risk is great, on account of the length 
of the summer season, which is practically without rain. 

In view of all these conditions, I can assure you that the situation 
there is most acute. And in the absence of Mr. Toole I would re- 



H. C. HOENBY 119 

spectfully ask for your permission for this territory to file a brief at 
a later sitting of this Commission, in which the facts could properly 
be set forth pertaining to that territory. 

The Chairman: That can be done, Mr. Hornby, or you could 
have your own representative appear before us in Seattle or Spokane. 

Mr. Hornby: Thank you. In a general way I am familiar with 
the situation there and if there are any questions you would like to 
ask I would be glad to answer them if I could. 

Commissioner Parry: Have you an association in the Inland 
Empire ? 

Mr. Hornby: Yes, sir, the "Western Pine Manufacturers Associ- 
ation. 

Commissioner Parry: Who is president of that? 

Mr. Hornby: John K, Toole. 

Mr. Downman: Well, Mr. Chairman, Ave can adjourn now if it 
is your pleasure. 

The Chairman: We will adjourn until two o'clock. 

(Whereupon, at one o'clock p. m. an adjournment was taken until 
two o'clock p. m.) 



FOURTH SESSION 
TUESDAY AFTERNOON, JULY 20, 1915 

The Chairman : Mr. Downman, you may proceed, if you are ready. 

Mr. Downman: Mr. Chairman, the next gentleman to address you 
is Mr. C. H. "Worcester, of Chicago, representing the Northern Hem- 
lock and Hardwood Manufacturers Association. 



STATEMENT OF MR. C. H. WORCESTER, REPRESENTING 

THE NORTHERN HEMLOCK AND HARDWOOD 

MANUFACTURERS' ASSOCIATION * 

Mr. Worcester: Mr. Chairman and gentlemen, I am very glad 
that this hearing is in the nature of an informal conference. I have 
never appeared before a body of this kind and I am somewhat at a 
loss as to just the form of presentation to make, although I have 
learned a little since you started. 

I have additional copies of my original statement here, which my 
secretary has not appeared with as yet, but later on I will hand them 
to you ; but I will say that I do not intend to burden yon with a literal 
reading of this statement. 

Since I have been listening to the statements made by others, 
some new thoughts have come to me, and some original thoughts 
which I had I do not think it is necessary for me to enlarge upon. 

The Chairman: You will file the original statement? 

Mr. Worcester: I will file the original statement, yes, sir, and 
as soon as they come in I will hand you the original statement, so 
that you can refer to certain statistical evidence contained therein. 

In the beginning, I want to say that I appear representing a 
comparatively small section of the lumber business of the United 
States. "We manufacturers of hemlock and hardwood up in Wisconsin 
and Northern Michigan are trying to do the best we can to make a 
success in utilizing what is left of the natural resources of that sec^ 



See brief, page 149. 

121 



122 FEDERAL TRADE COMMISSION HEARING 

tion. You perhaps are, most all of you, familiar with the early his- 
tory of the white pine industry in the states of "Wisconsin and Michi- 
gan. You all know there were very large and valuable stands of 
white pine in that section, and there was a certain class of lumbermen 
went up there, got possession of those lands, turned those white pine 
forests into lumber, and floated it down the Mississippi and built up the 
prairies of the West, the states of Nebraska, Iowa and all that western 
section. You go through that section today and you will find that the 
majority of the buildings are built there of white pine. 

Now, they cut all over that country and left here and there little 
groups of hemlock and hardwood scattered all over the country, and 
when they got done, nineteen out of twenty of them folded up their 
tents and went to the South and went to the West, and took the money 
which they had earned there and reinvested it in other sections, and 
they sold to us lumbermen who remained there, these same lands. 
They started in on a basis of five dollars to six dollars, and they ran 
up to ten dollars an acre, and from that on up to twenty dollars an 
acre. 

That process began in 1896 to 1897. Personally, I first began to 
manufacture in Menominee County in 1898. 

I was among the first of the hemlock and hardwood manufacturers 
in that section, and I have been trying to make a living out of that 
kind of stuff, the skimmed milk, as it were, which the white pine manu- 
facturers, who took the cream, left behind. There has come to be a 
very important natural resource in that kind of timber in this section 
of the country, and it is very important for that section of the coun- 
try, because it is all that is left. 

Now, we people feel, in the last five or six years, that we are be- 
ing crowded off the map ; that we have been left in a struggle for ex- 
istence, and that we have a plea and a grievance against the manu- 
facturers in the South and West, I will dilate on that more largely 
later on, because I think it is proper first to outline the condition in 
which we find ourselves as to our cost of production and a few of 
those statements. Then I will later on point out to you what I, as a 
layman, not a lawyer, but a business man, believe this Commission 
can do to help us, in meeting this tremendous competition which we 
meet in the marketing of what is left of the natural resources of our 

section. 

The Northern Hemlock and Hardwood Manufacturers Association 
comprises eighty manufacturers of lumber in Wisconsin and Northern 



C. H. WORCESTER 123 

Michigan. Of these eighty manufacturers, twenty-six cut less than 
five million feet per annum, tAventy-four cut very close to ten million, 
thirteen cut from ten to fifteen million, nine cut from fifteen to twenty 
million, three only cut from twenty to twenty-five million, and one 
only cuts above twenty-five million. Now, these plants average very 
small as compared with the yellow pine and the West Coast mills, as 
you will see. 

The principal woods manufactured by our Association members 
are proportioned as follows : 

Hemlock, 60 per cent, being the major wood which we are cutting, 
that is, the major wood which comes in competition with fir, and yellow 
pine. Maple, 14 per cent; birch, 14 per cent. Birch is a very valu- 
able wood which a few years from now, if things keep on as they 
are, will be in the same class as black walnut is today. It was not so 
many years ago when black walnut was made up into fence rails and 
burned on locomotives, but today they are scouring the woods and 
picking up every tree on the farms, for cabinet wood; and birch is 
going the same way. Elm, 4 per cent; ash, 1 per cent; basswood, 6 
per cent; oak, 1 per cent. 

During the year 1914 the members of this association produced of 
hemlock and mixed hardwoods 823,000,000 feet, which was about 60 
per cent of the total production in that section of those classes of 
woods. We shipped only 626,000,000 feet, leaving a surplus on hand 
in the hands of the manufacturers of 196,000,000 feet, or 31 per cent. 
Now, if our plants had been operated to their full capacity we would 
have a surplus over shipments of 870,000,000 feet, or an overproduc- 
tion of 138 per cent. 

The Chairman: As against an actual production of how much? 

Mr. Worcester: Eight hundred and twenty-three million. The 
rated capacity of the sawmills of the members is 1,497,000,000 feet. 

The Chairman: You ran then about 50 per cent of your capacity? 

Mr. Worcester: I should say that the figures were as 14 is to 8, 
or about 60 per cent. 

During the first five months of 1915 the member plants produced 
277,000,000 feet. We shipped 227,000,000 feet. You see the pro- 
duction was reduced and came more nearly in line with our shipments, 
but we added to our inventory 50,186,000, or an addition of 9 per cent 
to our inventory stock on hand. We actually shipped 22 per cent less 
than we produced. 



124 FEDERAL TRADE COMMISSION HEARING 

Now, if the plants of the members had been operated to full ca- 
pacity we would have had an excess of 460,000,000 feet during that 
period, or 202 per cent. 

Now, this failure, in spite of our curtailment, is caused by the 
competition which we have met in the hemlock business, very largely, 
from yellow pine and from fir. These figures show the accumulation 
of large surplus stock of lumber in the hands of our members, in spite 
of the fact that during the first five months of 1915, 26 per cent less 
was manufactured than in the corresponding period in 1914. That 
shows that we have done our part on the curtailment, but it does not 
do any good. 

This surplus and over-production stock in the hands of our manu- 
facturers, coupled with the keen competition of southern lumber sold 
in northern markets at the low cost of southern production, has caused 
a complete demoralization of the markets. 

A struggle exists today among the members of the association to 
dispose of their product in competition with each other, in competition 
with manufacturers not members, and in competition with Southern, 
Eastern and Western woods. 

The result is that the business of the members is being conducted 
at a loss, the natural forest resources of our section of the country are 
being wasted and sacrificed, and it is only a question of a short time 
when the endurance of the strongest will make itself felt, and the 
curse of overproduction will be cured by the crushing out of the 
weaker firms. There have been a large number practically crushed 
and shut out in our section of the country. 

In support of this statement we have here an average statement of 
operating cost from a large number of the members of our Associ- 
ation. I will not burden you with the detail of it, because you can 
get it all and subject it to the analysis of your experts. This state- 
ment has been collected in good faith, and it will be maintained in 
presenting it that it is representative of the condition of the industry. 
It shows an average cost of producing lumber of all kinds in our 
section of $13.80. This is simply the operating cost. , 

Commissioner Parry: What is the cost? 

Mr, Worcester : Thirteen dollars and eighty cents. That is simply 
the actual logging, freight paid, cost to manufacture, yard expense, 
shop, sales expense and depreciation on properties that have been 
charged a depreciation. 

Commissioner Parry: Yes. 



C. H. WORCESTER 125 

Mr. Worcester : The general expenses, including salaries and taxes 
on the mill plant, but not including any timber. 

Commissioner Parry: No stumpage? 

Mr. Worcester: No stumpage, no interest on plant whatever was 
included in the $13.80. 

Now, we received for our product during the first six months, 
January 1 to June 1, $15.32. The difference between $13.80 and $15.32 
is $1.52. That represents stumpage, and interest on our manufac- 
turing plants, and the money used in the buildings. 

An average concern manufacturing, we will say, 20,000,000 feet 
of lumber uses in the neighborhood of $400,000 in their business. In 
their inventory of their yard, they carry fifteen to twenty million feet 
of lumber on hand curing and seasoning, and they have $50,000 to 
$75,000 tied up in accounts, and then their investment in their manu- 
facturing plants, so that about $400,000, I think, would represent the 
average investment outside of timber for a concern manufacturing 
about 20,000,000 feet in our section. 

Now, six per cent on that would be $24,000, and divide that by 
20,000,000 it would be $1.20 for interest alone. So that we would have, 
figuring it at $1 to make it conservative, 52 cents left to represent 
stumpage. 

Now, by a process which I will explain later I have computed 
what the average cost of stumpage has been to the members of the 
association. 

Commissioner Parry: You are talking about hemlock now? 

Mr. Worcester: I am talking about hemlock and mixed hard- 
woods. 

Commissioner Parry: And mixed hardwoods? 

Mr. Worcester: Yes, it includes all the hardwoods, maple, birch, 
ash and elm, and everything we produce. This is the average cost 
of the whole thing. 

The average cost of stumpage of these various woods, as arrived 
at by a method which I will explain to you later, is $4.06. On page 5 
you will find that cost statement, and my statements have just arrived, 
so that I will distribute them among you. 

I will say to you gentlemen who have those books that I am going 
to skip all over this thing and I will refer to the pages as I touch 
upon them, unless you would prefer to have me go straight through 
the statement. 



126 FEDERAL TRADE COMMISSION HEARING 

The Chairman: No, I think it is better to go on in this manner. 
You are presenting it very clearly. 

Mr. Worcester : Then if you wish, I will continue on these various 
items that enter into this expense of production. 

Commissioner Hurley: What I would like to know, Mr. Wor- 
cester, is whether you are basing this upon a particular volume or 
whether you have taken an average for 1912, 1913 and 1914. Have 
you taken the volume for 1914, under war conditions, and based your 
percentage on that? 

Mr. Worcester: This cost is based on 1914, yes, sir. 

Commissioner Hurley: Did not the war affect it? 

Mr. Worcester: We did not feel the effect in labor until the 
1914-1915 crop. Our conditions are a little different from what they 
are in the South. Only a few of our members continuously supply 
their mills with logs. In the South they have a railroad running 
out from the mill and the logs that are logged this week are sawed 
next week. With us our operations are all mixed up, and we do it 
in all kinds of ways. We go away up stream and send a crew of men 
up in camps to prepare a stock of logs, and we dump them into the 
stream and drive them down the river. Then a few of us have rail- 
roads running out of our mills and part of our supply is a continuous 
supply. In my own individual operations in both of our mills we have 
distinct and different kinds of operations, three distinct and different 
operations. We have a continuous supply for a part of our product; 
we have a winter operation that involves sleigh haul, and those logs 
come down stream; and then we have another operation away off 
perhaps a hundred miles from the mill where we cut some timber 
and haul it out to the railroad, load it onto the cars and pay the 
freight to the mill. So that our operations in a good many ways are 
not comparable in any way with the operations of the yellow pine 
lumbermen of the South or of the fir people. 

The Chairman: Your cost of stumpage, you say, is what? 

Mr. Worcester: The cost of stumpage as determined by this 
calculation, which I will explain to you later, is $5.48. 

The Chairman : Is that for one year only ? 

Mr. Worcester: No, that is the cost on January 1st, 1915. 

The Chairman: It does not purport to be the average cost for 
the past ten or twelve years? 

Mr. Worcester : No, it is a progressive cost, Mr. Davies, as I will 
show you a little later. 



C. H. . WORCESTER 127 

The Chairman: What I had in mind, knowing something about 
the hemlock business up there, was this, that along about 1896 or 
1897 you were buying hemlock by acreage and it cost you probably a 
very small amount ; whereas, in a few years it jumped up to $2.50 a 
thousand. 

Mr. Worcester: In about ten years it jumped up to $2.50 a 
thousand. 

The Chairman: Yes. I was just wondering on what basis you 
computed this cost of stumpage. I just wanted to get it clear in my 
own mind. 

Mr. Worcester : I think I will make that clear to you, Mr. Davies. 
I think I have heard it remarked that you in the early days, a 
good many years ago, were somewhat interested in the forest reserves 
of Wisconsin. I myself went into the business in northern Michigan 
in just the period you have mentioned, 1896-1897. At that time I paid 
50 cents a thousand for my hemlock stumpage, and that hemlock 
stumpage was right alongside the railroad. All we had to do was 
to just skid it to the railroad and then load it onto the cars, and we 
had a mere nominal freight to the mill. I sold hemlock piece stuff 
for $10 a thousand and made $2 a thousand on it at that time. Why? 
Because the stumpage did not cost me hardly anything and my logging 
cost was very low. We did not have to go away back from the railroad. 

Today if you want to get any of that timber outside of very small 
descriptions which are scattered around and held by some as specula- 
tive, we have got to build a railroad ten or fifteen or twenty miles 
and we have got to go back into the country for it. All that adds 
to the cost of getting at this timber. 

Included in this cost reported here, are operations by different 
concerns, some of whom have got to go away back into the country 
for their supplies and some of whom have not. In computing this 
average cost of stumpage here we have, therefore, taken those condi- 
tions into consideration. It shows, as I said, an average cost of 
stumpage of $5.48, which is reduced by the amount of lumber we get 
out of the logs to $4.06. That shows an average loss of $2.54 on the 
average product. 

Now, we will revert to this stumpage table on page 4, if you please, 
and if you will I will ask you to unfold that sheet. As your Chair- 
man, Mr. Davies, has mentioned, I have a couple of paragraphs here 
which were presented to me by the president of our association, Mr. 



128 FEDERAL TRADE COMMISSION HEARING 

R. B. Goodman, and I will read these two paragraphs bearing on that| 
very subject which the Chairman has mentioned. 

"There are two periods in the history of the industry in "Wisconsin! 
and Michigan during the past thirty years : 

' ' First : The period of increasing values and gradually advancing | 
price level, which terminated about 1907, which was rife in timber 
speculation ; replete with big enterprises, which developed a few big men 
and a few large fortunes. A period of wonderful development in which 
all the other great industries equally shared. 

' - Second : The period of fluctuations from a stationary or hori- 
zontal price level that has existed from 1907 to the present day, which 
means, with some exceptions, a stationary stumpage value and the neces- 
sity of the mill operator earning each year the taxes and carrying 
charges of his entire stock of standing timber — and I must say he has 
not done it. A period in which all of the tendencies lead to wasteful 
and ruinous over-production." 

This stumpage schedule was compiled last January before I had 
any idea anything of this kind would come up. There had been quite 
a discussion among our members as to cost accounting in trying to 
formulate some method of cost accounting in our association as to what 
stumpage was worth. One man figured that his stumpage was worth 
on hemlock, for instance, $4, and another man said it was worth $2.50, 
and still another man said it was worth $3.50. We wanted to arrive 
at some basis for determining what the stumpage should be called 
worth. We all knew when we went out in the market and tried to 
buy any we had to pay from $3.50 up to $6 a thousand, depending 
on who held it, whether it was speculators, or how strong they were 
financially. Here and there somebody would get caught and be hard 
up and have a mortgage on his timber and we would be able to grab 
off something. 

I solicited the opinions of a large number of timber owners in 
northern Wisconsin and Michigan and I determined by a process that 
I will explain that the average of all our members seemed to start 
fairly equal in their purchase of timber January 1st, 1907. From the 
information I secured I thought that was a fair date on which to 
commence the computation of what the stumpage cost our different 
members. 

We therefore selected that date, January 1st, 1907. Then accom- 
panied with this information which I got, I tabulated the record of 
sales and purchases and opinions as to the value of what was asked 
for stumpage. Of course, in the compilation of this report I had our 



C. H. WORCESTER 129 

own records to go by. In fact, the companies in which I am personally 
interested bought in that period about 20,000 acres and paid these 
average prices for stumpage. Commencing on that date, January 1st, 
1907, and taking hemlock at $2.50 and adding six per cent interest 
on cost, and one per cent depreciation, and that one per cent is very 
necessary because in the shape onr forests are in they are constantly 
being eaten into by fires, by wind storms and by destruction from 
insects. It was only a few years ago when all the tamarack in northern 
Michigan was destroyed by insects. 

The Chairman: Any offset growth? 

Mr. Worcester: "We all of ns agreed after considering that matter 
quite carefully that the deterioration in over-ripe timber and the losses 
from fire and so forth very much overbalanced the growth in onr sec- 
tion of the country. Yon see onr section of the country is not in solid 
groups; it has been cut all over, here and there, for white pine, and 
it has been made peculiarly vulnerable, and the losses to standing 
timber are, I think, greater in that section than they are in other 
sections. 

That brings down, as I said before, an average cost for stumpage 
on January 1, 1915, of $4.65. That is really what stumpage has 
actually cost the average member of our Association. 

Commissioner Parry: What is your basis, board measure or 
log scale? 

Mr. Worcester: That is log scale. 

Commissioner Parry: Log scale? 

Mr. Worcester: Log scale, yes, sir, on hemlock. It brings down 
our maple to $2,785. That may seem low to you comparatively, but 
our maple is a poor quality and does not compare with the maple in 
some other sections. 

It brings down our cost of birch to about $7.44. 

It brings down our cost of basswood to $11.16. Basswood stump- 
age was worth more in January, 1907, than it is today. 

It brings down the cost of elm to $9.32. 

It brings down the cost of ash to $11.16. 

On page 6 we have prepared an individual operating cost and 
realization of each of the principal woods which we manufacture. I 
think you will be able to see that manufacturing so many different 
kinds of woods, cutting them in the forest all at once, it is quite im- 
possible to get at what it costs you to produce each kind of wood, 
but that it is necessary use certain arbitrary figures in making certain 



130 FEDERAL TRADE COMMISSION HEARING 

arbitrary deductions. But we have worked on that for quite a while, 
and I myself have been somewhat of a crank on that subject of trying 
to find out where we were making or losing money. Whereas, taking 
the average manufacturer who does not keep cost accounting books, 
he only knows at the end of the year that he has lost money but he 
does not know where he has lost it. This table is therefore only 
interesting as showing that we are losing most of our money on 
hemlock. 

The hemlock column starts with a stumpage cost of $4.65 and 
shows a loss of $3.41. You might say if you deducted this loss from 
the hemlock stumpage charge that it would give you what was left 
for stumpage. You can see there is not. very much left. 

Then, again, these figures do not include any interest on our 
plant, so that you have another dollar to add to that. "We are losing 
an average of over $2.50 a thousand a year. 

Commissioner Parry : On all woods ? 

Mr. Worcester: Yes, on the average. 

The Chairman: How much are you below your average produc- 
tion? 

Mr. Worcester : We have cut 26 per cent less the first six months 
of this year than last year. I will continue, unless there is something 
else you would like to ask. 

Commissioner Hurley: I would like to ask you the percentage 
of your mills up there that are in your organization ? 

Mr. Worcester: I couldn't answer that question as to the per- 
centage of the mills. We have about 60 per cent of the production. 

Commissioner Hurley: You have? 

Mr. Worcester: Yes, about 60 per cent of the production is repre- 
sented in this Association. There are some very large manufacturers 
that are outside of the Association and quite a lot of small manu- 
facturers. In fact, the business is spasmodic. The conditions up there 
permit the establishment of mills that can be put in over night, these 
portable mill operators. 

Commissioner Hurley: You do not ship abroad, you do not do 
any foreign trade at all? 

Mr. Worcester: Very little. We did do some Canadian trade 
last year. In fact, in 1914 we were so crowded out of this market 
here by yellow pine that we had to find some place to put our hemlock, 
and we found they liked our hemlock in southern Canada, and we 
put quite a large amount of hemlock into St. Thomas and Toronto 



C. H. WORCESTER 131 

and that section of the country. But this war tax came along and 7 
per cent ad valorem, and just chopped us right off, and has still further 
confined our market. 

The Chairman : The war tax imposed in Canada ? 

Mr. Worcester: Yes, 7 per cent ad valorem on rough lumber. 
Before that there was no duty on rough lumber. 

Commissioner Hurley: In the charging off for depreciation, do 
you charge off every month or at the end of the year? 

Mr. Worcester: Most all of us charge it off at the end of the 
year. 

Commissioner Hurley: What do you think is the best method of 
charging off depreciation, each month or at the end of the year? 

Mr. Worcester: Where you are running as they do in the South, 
and cut so much timber each month, and you are able to keep the 
monthly cost accounts on your logging, it is very easy to keep a 
monthly account. But in most places in the South they ship their 
lumber about as fast as they make it. We pile all our lumber on the 
yard, and it has to be cured and seasoned, and it averages five or six 
months in the yard, and that which we make today may not be 
shipped until six months later. So cost accounting would be very 
difficult for us to employ along the same lines they use in the South. 
We have one operation in our business in which we practically con- 
tinuously supply our mills, and in which we might be able to do that, 
but with the average mill in our section of the country that system 
is not adaptable, and it would be very difficult to do it in practice. 
Therefore, the depreciation on most of the mills is figured up at the 
end of the year. In fact, I think the majority of our members do 
not know whether they have made any money until the end of the year, 
until they inventory everything up and get their logs all sawed up. 
Some will have logs in forty different places around the country and 
away up streams, and they may not get them. They may be decked 
out on the railroad and be burned up before the time comes to use 
them. 

This statement of cost and realization shows a loss of $3.41 to 
ll 1 /^ cents, or an average loss of $2.54, without any interest, 

Labor has shared in that loss in our section. Of course, you 
gentlemen have heard a great deal about that from the other repre- 
sentatives here, and may be tired of it. I will simply say we have 
tabulated the wages we paid in 1912, 1913, 1914 and 1915, and you 
will find the most marked reduction in the January, 1915 column. 



132 FEDERAL TRADE COMMISSION HEARING 

You see, most of us working in the winter time, our reductions in 
wages do not show until about six months afterwards in these statistics. 
However, it shows that there has been a reduction in wages at the 
manufacturing plants, of 4.15 per cent, and in the woods an average 
of 13 per cent. 

Of course, the largest amount of money is spent in the woods 
and we figure that the reduction averages about 10 per cent, and 
that we spend for labor in the production of our stuff about $9.00 a 
thousand, which makes a loss of about 90 cents a thousand on labor 
in the reduction of wages. That amounts on the amount of lumber 
cut this year, to about $540,000. But we have reduced our produc- 
tion compared Avith last year 223,000,000 feet, and it is going at that 
rate now, and I think it is fair to conclude that the labor in our sec- 
tion has suffered a loss of $9.00 a thousand on 223,000,000 feet of work 
which they have not had. And it is apparent up in that section ; there 
are plenty of idle men. In fact, in our camps last winter we had 
men come to us and say "We want work, and let us work in your 
camps and we will wait until there is a vacancy, we will work every 
day for our board." But we did not take a man on that basis. 

Commissioner Hurley: What is the labor situation up there now? 

Mr. Worcester: The labor situation is that you can get all the 
labor you want at almost your own price. In that particular section 
in which I am personally interested, that is true, in spite of the fact 
that the copper industry of Houghton County — and one of our prin- 
cipal mills is in Houghton County, within twenty-five miles of the 
Calumet and Hecla mines — those mines are doing everything they can 
to increase the production of copper, and yet men are constantly com- 
ing to our plants and wanting employment. In fact, they have been 
attracted to that section by the stories of prosperity in the copper 
mines, and the result is we have a surplus of labor. I figure that 
labor is suffering a loss of practically four and a quarter million 
dollars on account of these conditions which are prevailing in the 
lumber business in our immediate section, that is, counting every- 
body engaged in the industry. 

The second move to reduce costs in producing lumber is to leave 
more timber in the woods to be burned up and lost to the public. 
Logging costs vary up and down according to the size and quality of 
the timber cut. The smaller the timber cut, the higher your logging 
cost is, as you can see. At present prices of lumber small and under 
average quality trees are left in the woods, as the logging cost is too 



C. H. WORCESTER 133 

high to make it pay, and this applies equally to the process of manu- 
facture in the mills. When prices are low and a large surplus produc- 
tion exists, the manufacturers are forced to waste their timber. The 
amount of timber left in the woods varies greatly according to the 
quality and quantity per acre of the timber being cut. Take a section 
with poor timber, the waste would be much greater in that than it 
would be in a section of fine quality. In some cases it is very large, 
but there are no data existing on which to base an accurate statement. 
Authorities in different parts of the states of Wisconsin and Michigan 
have been consulted and their statements averaged, showing under 
1915 market conditions a loss of 2,000 feet to the acre of timber wasted 
for lumber purposes through inability to manufacture it without a 
loss at present prices. This causes a serious loss to the community 
and to the lumberman, a loss which has been pointed out many times 
by economists, and for which the lumberman has been roundly abused 
in the last few years. I myself personally have come in for quite a 
lot of it, and I want to say that the lumberman is anxious to remedy 
this condition, but he does not know how to do it. We are all looking 
to this Commission to help us find some remedy for it. 

The forested lands of Michigan and Wisconsin vary greatly in 
yield of timber, cutting from 5,000 feet to 15,000 feet per acre, that 
is, speaking only of real forest lands. An estimate of 8,000 feet to 
the acre is a high average for the district. The total for Michigan 
and Wisconsin is 2,987,000,000 feet, and requires 373,464 acres to 
furnish that timber. At a loss of 2,000 feet to the acre on account of 
inability to realize on it there is an economic loss annually in this 
district of 746,000,000 feet, which computed at $4.00 per thousand 
feet equals $2,987,000. If this timber was all cut it would require 
74,694 acres less to produce the total cut. That is quite a large 
amount, when you consider that six miles square is a township, and 
about 22,000 acres, and it would take about eighteen square miles to 
equal the loss from present methods of cutting. 

Our conservationist friends in the various associations organized 
for that purpose in this country, and the United States Forest Service, 
point out that the lumbermen are at fault and are making their own 
troubles, manufacturing more lumber than the country needs, and 
not only ruining one of the great businesses of the country and one 
of the foremost industries, but also wasting important and necessary 
natural resources of the country by wasteful methods of cutting and 
artificially depressing the value of standing timber. To this indict- 



134 FEDERAL TRADE COMMISSION HEARING 

ment the lumber-men must plead guilty; we are doing it, unques- 
tionably, but at the same time we enter the plea in justification of self- 
defense. 

The fact is, that the lumbermen of this country are being driven. 
They are not voluntarily running a reckless, thoughtless race. Many 
of them have no choice. The carrying charges on standing timber 
are increasing, due to the compounding of interest, the large increase 
in taxes, losses by fire and with storms, and increasing of cost of care 
and surveillance. Interest rates have not increased, but the total 
annual charges are such that large numbers of lumber manufacturers 
are forced by financial need to cut more lumber when the price is 
low than when it is high, as they must have certain sums of money 
each year with which to pay acquired debts and interest and taxes. 
"When the price is low they must cut more lumber, as it requires 
more feet at the lower price to provide funds. There are a large 
number of lumbermen in exactly this predicament, and also a large 
number who are not in this condition. 

I want to say there are a larger number who are in debt, because 
that is the chronic state of a lumberman, but there is a percentage 
of men who are not in debt and who are not forced under these condi- 
tions to do this. But interest is just as dear to the man who has his 
money invested in timber lands as it is to the investors in farm 
mortgages and municipal bonds, and he does not want to lose interest 
and accumulated charges which he has put out on his timber, and the 
result is there is a great pressure behind the lumberman which has 
arisen almost entirely since 1907, and which has become cumulative. 
The lumbermen are getting scared to death for fear they are going to 
lose their money in carrying this timber. If you will look back at the 
average lumber prices since 1907, you will see almost a straight line. 
There has been no appreciation in the value of the product sufficient to 
warrant the absorption of these carrying charges. There has not been 
money enough in the business to absorb them. 

The Chairman: Is not that more or less typical of the lumber 
business, that you have a feast or a famine largely? Is not that the 
history of the business? 

Mr. Worcester: It was up until 1907, but I think if you will 
study the statistics as provided by the census you will find that the 
line of prices made an ascending line until it reached about 1907, 
and from then on, with little bits of ups and downs, you will find almost 
a straight line down to date. 



C. H. WORCESTER 135 

The Chairman: There was a long period in the white pine 
industry when those conditions prevailed ? 

Mr. Worcester: Yes, but that line in the white pine industry is 
a level advancing line, with some short drops of very short duration. 
The white pine industry was blessed with a market which constantly 
absorbed the carrying charges. It kept getting a little more money 
all the time, and it constantly absorbed their carrying charges with 
some few exceptions. Of course, that was before my day, but there 
are quite a number of men that I know of who have told me that it 
was the reverse of this, and I think that can be substantiated. The 
statistics of the census — I think I can convince you on that, Mr. 
Chairman — 

The Chairman: It is immaterial. Just go right ahead. 

Mr. Worcester: If you will look at that blue line (handing 
paper), I think you will find that it shows a very good advancing 
situation until it reaches 1907, and then from then on it runs pretty 
nearly straight. 

"While we are on that subject, Mr. Chairman, I have here an ex- 
hibit — well, the census figures do not go back far enough, but they do 
in that statement which I handed you. 

I think I left off somewhere about the pressure on the lumberman 
from an accumulation of carrying charges, and I think I stated that 
this situation has come up very largely since 1907. We have not had 
the constant appreciation in the value of our lumber, and there has not 
been profit enough in the business for us to absorb those carrying 
charges outside of our business. The result is that all sorts of methods 
have been adopted by our manufacturers. Most of them have been 
buoyed up with the hope that ' ' Oh, well, this is only temporary. ' ' It 
has always been the case in the lumber business that well bought 
stumpage would carry itself with interest and taxes, and for quite a 
number of years we have sort of consoled ourselves that that would 
be so. But the last three years we have gotten to a realization of 
the facts, that it is not going to do it unless we are able to get more 
than cost for our lumber. 

Now I believe that this pressure behind the lumberman is the most 
important thing in the production of lumber today in the United 
States, and I believe that the stage is set in the United States for a 
chronic state of over-production. 

This is not the place that I intended to make that statement, but it 
is made now and I will amplify it. This pressure behind the lumber- 



136 FEDERAL TEADE COMMISSION HEARING 

man in the shape of accumulating interest and taxes is felt not only 
by the lumberman but by everybody who has a group of timber for 
speculation in the United States. You gentlemen know that through- 
out the South and West there are syndicates, hundreds of them, that 
have groups of timber. Those men are today putting up the interest 
and taxes to carry those groups. Many of them have money borrowed 
and have bonds out on them and so forth. Now they are getting 
awfully tired of it and are waiting for a chance, as soon as the lumber 
market improves, to jump in and build mills and try to earn some 
money to pay those carrying charges, taxes and so forth, which are 
mounting up and up and up, particularly in the West, and an increase 
of 118 per cent in our section. 

Just as soon as the lumber market begins to show a little peak, 
you will find these mills will commence running, to try to make up 
for lost time, and there will be a lot of new mills put in on these 
syndicate groups. And I believe the stage is set today for a chronic 
over-production in the lumber business until the end begins to come 
in sight, unless some method is devised to regulate this thing. 

Now, the lumber business is in a unique position among the manu- 
facturing industries of the United States. I refer to the fact that 
most of the lumber manufacturers of this country are obliged to own 
and carry on hand all of the raw material with which to run their mills 
for them from ten to twenty years. You have heard that statement 
made before, but I do not think it has been emphasized sufficiently. 

Just consider this a minute as applied to the other manufactur- 
ing industries all over the United States. How many of them are there 
that are absolutely required to justify their plants by the purchase 
of from ten to twenty years' supply of raw material? Take coal 
mines, that is necessary, but the royalty on coal is a very minor 
item, it is only about 5 per cent, and it does not involve a great 
increase. At the same time, in the coal lands, which are held in 
advance of mining, the surface can be farmed and used during the 
process. 

Take clay working concerns ; their stuff does not cost them much 
of anything. I am interested in a brick works, and we have a big clay 
bank there that will last forty years, and we do not figure the raw 
material worth anything. 

Take iron ore supplies; 55 per cent of the manufacturers of iron 
only carry a few months' supply of raw material on hand. 

The United States Steel Corporation and its allied industries, I 



C. H. WORCESTER 137 

believe, representing perhaps 45 per cent of the production, do carry 
some raw material, but the investment in raw material in the ground 
is perhaps only 15 per cent of the cost of the finished pig iron, while 
in the case of the lumberman the cost of the raw material is from 
25 to 40 per cent, and he has got it on hand and the interest and 
taxes are constantly accumulating on it. You must either make enough 
in each year of profit to take care of that or must progressively 
receive each year an advance in the price of lumber to take care of 
it, or you must make in each year enough to represent the average 
cost over the whole period. There are those three methods. 

In the back of this book I have outlined that in detail, showing 
just how a group of timber works out on those three methods, show- 
ing the working out of the three different methods. 

And I would like to ask you gentlemen who are perhaps not famil- 
iar with it to read those figures. 

Commissioner Hurley: We will, with a great deal of interest. 

Mr. Worcester: It will illustrate how stumpage which starts at 
$3 ends with $7.50 accumulation of charges, or if you assume the 
average, if you paid $3 you must start at $4.75 over the whole period, 
or if you make enough in each year to equal the carrying charges, 
then you must charge the first year $5.75 in order to carry your 
charges. 

Now, this is one of the features which I think makes the lumber 
business in a class by itself, and we have got problems that are peculiar 
to ourselves, and I want to emphasize that to the Commission. 

Now, if by any chance the directors of a furniture factory found 
themselves in the position of handling ten years' supply of lumber 
on hand and heavily in debt for the purchase, what would they do? 
They would probably -go out in the lumber market and try to sell it 
right off, or if they could not sell it at a profit, they would run their 
factories night and day to work it up into something and get rid of it 
as quick as they could, and get down to a few months' supply on 
hand, and expect the lumberman to carry it for them. It has always 
been the lumberman's job to carry that raw material. Now, that used 
to be a profitable part of the lumberman's business, and up to 1907 
it was profitable. There was an axiom in the lumber business that 
well-bought timber would carry itself with interest and taxes, and 
we would go anywhere and buy a piece of timber and say, "Oh, well, 
if we don't cut it this year it will be worth more next year," and well- 
bought timber would carry its interest and taxes. But it lias not done 



138 FEDERAL TRADE COMMISSION HEARING 

it in the last eight years, since 1907. In fact, stumpage is worth 
less today than in 1907. I say it is worth less, because stumpage, 
in the last analysis, is worth only what you can work out of it, after 
having made it up into lumber. The tree is not worth anything; you 
cannot sell a tree to a man who wants to build a house in Chicago, 
you have to make it up into lumber and deliver it in Chicago and 
deliver it on the job, and it is what is left after that process that the 
tree is actually worth. 

As I say, since 1907 the situation has changed, and the "West 
Coast people who thought they had such big bargains in timber out 
there are the sickest lot of people you ever saw, most of them. They 
cannot sell their stuff for what they paid for it ten years ago. And 
I suppose there are some hard luck stories in the South, also, and, of 
course, I could cite a great many in our own locality, and I could 
personally tell you some stories, but you can imagine that. 

Now, I suppose the average business man would say, "Well, you 
lumbermen, if you are making too much lumber in the country, and 
that is what is the trouble with the market here, why don 't you stop ? ' ' 
I have outlined some of the causes, but there are some causes local to 
our own district up there which are very hard to surmount, and I 
am emphasizing these causes as to why we do not handle this thing 
ourselves without any outside help, to show you that voluntary cur- 
tailment by the lumbermen is a very difficult thing. It cannot be 
handled voluntarily. It has got to be controlled in some way, because 
there are so many of them in debt that are being pressed by their 
creditors, that you cannot handle it voluntarily. We have tried to 
handle it. I am willing to confess to you, in spite of the Sherman 
Anti-Trust Law, that in our own section we tried to do what little we 
could do and it results in two or three doing it, and the rest do 
not do it; that is what it amounts to. We have not had any written 
agreement or anything of that kind, but we have got together and 
have all agreed that we were making too much lumber. Now, the 
cure for it is to stop making lumber. Now, we have made 26 per 
cent less, but it has not been because of any agreement, but because 
a lot of plants have been forced to do it. 

Now another thing that prevents the lumbermen in our section 
' from doing very much in this problem is the fact that we feel that 
our cut will not make any difference if we stop cutting altogether. 

The government report for 1912 fixes the production of yellow 
pine at 14,737,000,000 feet. Now, the total cut of hemlock in Wis- 



C. H. WORCESTER 139 

consin and Michigan is 1,145,000,000 feet. Now, you add those two 
together to get the total production of hemlock and yellow pine and 
hemlock is only 7.27 per cent of the total. Therefore, if we cut off 
33% per cent of our production, it will only amount to 2.4 per cent of 
the total production, which would not cut any figure; whereas, it 
would only take a reduction of 2.6 per cent in the production of yellow 
pine to equal 33% per cent of our production. 

Now, I have detailed these figures to show you what a com- 
paratively small factor our hemlock cut is, and how little possible it 
is for the manufacturers to control the production. 

The members of our Association in Wisconsin and northern Mich- 
igan manufactured in 1914 only 451,241,000 feet of hemlock. If we 
were able legally to control our members and cut no hemlock at all, 
the decrease in the total of yellow pine and hemlock would be only 
2.8 per cent. So you see it does not do any good for us to try and 
cut it. This curtailment has to be handled in a broad way. The 
futility of curtailment by our manufacturers is illustrated by the 
fact that our members during the first five months of 1915 cut 24 per 
cent less hemlock than during the same period in 1914, with no appre- 
ciable result on the market. Radical curtailment on our part is unfair 
to us. We would be giving up our natural trade territory to yellow 
pine without changing conditions materially. A hemlock log produces 
nothing but common lumber. A yellow pine log produces 30 per cent 
of high-priced lumber and 70 per cent of common lumber, the com- 
bination yielding a higher average return for the whole log than the 
product of a hemlock log, which is all common lumber. The cost of 
logging yellow pine is 40 per cent less than the cost of logging 
hemlock. These figures enable the yellow pine manufacturers to 
absorb excess freight and to sell their common lumber in the northern 
markets at below the average cost of production, against the best of 
our hemlock lumber at cost, and take our business away from us as 
far north as a line drawn east and west through Milwaukee. If this 
competition against our hemlock could be carried on at a profit by the 
yellow pine mills, then we might admit that it was legitimate, but the 
figures that have been presented to you show that the yellow pine 
people are selling yellow pine in competition with us below the cost 
of production, and the fir people are, also. And if you go into that 
inquiry we can show you that they have begun it first and they have 
kept progressively at it, and all we have done is to trail. And today 
we are asking and trying to get $1 to $1.50 more per thousand than 



140 FEDERAL TRADE COMMISSION HEARING 

yellow pine and are losing our business. - They have driven us out of 
the cities, and driven us away up into Wisconsin. Go to Madison 
today and you will find 7,000 feet of yellow pine to 2,000 feet of 
hemlock. We are losing our own territory, we are being driven away 
up into the woods in the corner, all due to the fact that this enormous 
outside production of yellow pine is being put in through competi- 
tion with us at below cost. 

Commissioner Hurley: From the South? 

Mr. Worcester : From the South and from the West. 

Commissioner Hurley: Is it true, Mr. Hines made a statement 
this morning that one of the great objections to the white pine industry 
here was the Canadian shipments in here of cheap lumber. Is it true, 
since the tariff has been reduced that the price of white pine is higher 
than it was before the tariff was reduced or the tariff taken off, 
coming into this country? 

Mr. Worcester: Well, he was referring to white pine. The price 
of yellow pine — yes, the price of yellow pine, I think, in those tables 
that Mr. Keith has given you will show that exact average. I do not 
remember just what time the tariff was taken off, but I have some 
figures here which will shoAv you the average price of yellow pine, if 
you know the year the tariff was taken off. 

Commissioner Hurley : The tariff was taken off three years ago, 
was it not ? 

Mr. Keith: October, 1913. 

Mr. Worcester: Well, in 1913 the average price of yellow pine 
was $16.65 and in 1914, $13.59, and for the first six months of 1915, 
$12.51. 

Commissioner Hurley: That is the average? 

Mr. Worcester: Yes. 

Commissioner Hurley: That is cheap, No. 4 stock, the lower 
grades ? 

Mr. Worcester: That is the average of the whole log, everything 
that the log produces, from box lumber to cheap stock. 

Commissioner Hurley: What page is that on? 

Mr. Worcester: Appendix No. 3. That price list takes the census 
reports down to and including 1912, and starts with reports from 
there on, 1913, 1914 and 1915. 

The Chairman: I think you had better proceed with your own 
line of thought, Mr. Worcester. 

Mr. Worcester: I will be very glad to answer any questions. 



C. H. WORCESTER 141 

The Chairman: Commissioner Hurley may ask yon some ques- 
tions after yon get through. 

Mr. Worcester: As I stated, if this competition could be carried 
on at a profit in these districts which are competing with us, we would 
admit it would be legitimate, that we have no right to complain of it. 
But it is being done at below cost of production. Now this competi- 
tion is not malicious, they are not doing it because they want to do it ; 
they are not selling stuff very low in Chicago and in Cincinnati at a 
higher price, and it is not what might be called malicious competition, 
such as a well thought out campaign to drive us out of the market, 
but the effect is the same. The effect is the same on us as if it was. 
It makes no difference. And the effect has become very disastrous. 

Now, I am not a lawyer, but I have read the Act creating your 
Commission, and to an ordinary lumberjack it seems to me that you 
have it in your own hands, gentlemen, to help us, and defend us against 
this unfair competition, as I call it. 

Section 5 of this Act states that unfair methods of competition 
in commerce are hereby declared unlawful. The Commission is hereby 
empowered and directed to prevent partnerships or corporations, 
except banks and common carriers subject to the Acts to Regulate 
Commerce from using unfair methods in competition in commerce. 

Now, this Act does not define what are unfair methods of compe- 
tition. It seems to me, as a layman and as a lumberjack as I say, that 
it is within the power of this Commission to determine what are unfair 
methods of competition, and if it appears on inquiry that this comes 
within the interpretation which is given it by this Board, and they 
decide that it is unfair competition, then they have the power to 
attempt to correct it. They have the power to institute a further 
inquiry to be made to confirm all this information which we have 
been putting in here, and to ascertain whether or not it is correct. 
Certainly, it seems incomprehensible to me that a body of gentle- 
men, intelligent men like yourselves, versed in business affairs, can 
sit here and listen to the statements which have been made affecting 
the third largest industry in the United States, and not feel that some- 
thing ought to be done to correct the situation, in view of the fact 
that every country in the world is trying to conserve its timber 
resources. I personally believe that this clause gives you the power 
to help us and we want you to help us for Wisconsin and Michigan, 
because we are between the two jaws of a nut cracker, and Ave are 
getting it in the neck, to put it vulgarly. 



142 FEDERAL TRADE COMMISSION HEARING 

Now, I am the father of this idea. I have felt this for some time 
back, and about six months ago I attended one of our Association 
meetings and I talked to our people and said here, we ought to bring 
suit. Here is this Federal Trade Commission coming on and they are 
going to take up these subjects. Now, if that Trade Commission is 
created for any purpose whatever, it is to help the business public, 
and we certainly need help. Now, one of the first subjects they will 
take up will be the first large industry which is presented to them. 
Let us make a formal charge against the yellow pine people. They 
are stealing our territory. We are competing against them. We 
know they are selling below cost and they are forcing us to do the 
same thing. Well, there was a difference of opinion among our 
people, and they said, ' ' Oh, I do not think we ought to. They are not 
doing it purposely. We ought not to show an unfriendly spirit against 
the industry. They are in as bad a fix as we are." So I came down 
to this meeting with my statement, and, of course, I do not want to 
be classed as a black sheep among my brethren. I have a lot of friends 
in the business in the South and in the West, and I do not want to 
be rated as making a malicious attack upon them. So I talked the 
matter over with them a little and it resulted in my going to Mr. 
Boyle here and asking him his opinion of this phase of the matter, and 
we prepared, or Mr. Boyle prepared, some remarks on that subject 
of unfair competition, which I would like to read to you : 

"In addition to the suggestions made as to Section 6 touching the 
Commission 's power to give affirmative aid, I call attention to some con- 
siderations of Section 5, as the same relates to the question of power. 

"Language of Section 5 to which attention is here directed is as 
follows : 

" 'That unfair methods of competition in commerce are hereby 
declared unlawful. 

" 'The Commission is hereby empowered and directed to prevent 
persons, partnerships, or corporations, except banks, and common car- 
riers subject to the Acts to regulate commerce, from using unfair 
methods of competition in commerce. 

" 'Whenever the Commission shall have reason to believe that 
any such person, partnership, or corporation has been or is using any 
unfair method of competition in commerce, and if it shall appear to 
the Commission that a proceeding by it in respect thereof would be 
to the interest of the public/ ,: etc. 

' ' My original thought, as to the unfair competition section, was that 
its scope was confined to those business practices which, for a long period 



C. H. WORCESTER 143 

of time, we have classified as unfair competitive methods, such as price 
discrimination, tying contracts, etc. The Clayton Bill, Sections 2 and 3, 
defines certain things as coming within the condemnation of the Act. 
The things condemned are within the scope of unfair competitive 
methods. 

"The Trade Commission Act goes much farther and brings within 
its scope all unfair competitive methods that are hurtful to the public. 

"Section 5 is all inclusive and gives the Commission large discretion. 
Now, it is to be noted that under Section 5 that public welfare is the test 
to be applied to the unfair practices investigated. Just what will be 
considered as unfair competition under the section is as yet a virgin 
question. 

"As suggested, the resultant effect on the public is the touchstone 
to be used. It is clear that if the Yellow Pine people, for instance, with 
a view of crippling Hemlock interests, were to come into the territory 
of the latter and sell its product at less than cost, doing this with design 
and for a selfish purpose, such conduct would surely come within the 
purview of the Act, — that is, if it could be further shown that as a 
result of this situation public welfare was involved. It would seem that 
this conclusion must be sound. 

"Assume, however, that as a result of market conditions, due to 
over-production, the Yellow Pine people were compelled to sell their 
product at less than cost, and under such circumstances invaded Hemlock 
territory ? No unworthy purpose is involved. And further assume that 
this competitive condition is destructive of Hemlock interests, to the 
same extent as if unworthy ulterior motives were back of Yellow Pine 
interests. That as a result of these conditions public welfare was 
touched, — would not such a situation come squarely within the Act ? In 
other words, it is a question as to the effect and not the intent which 
would be the deciding factor. 

' ' The hypothesis last suggested represents the exact situation at the 
present time. The Hemlock people are subjected to unfair competitive 
conditions, and this due to the fact that Yellow Pine interests are selling 
their product in Hemlock territory at less than the cost of manufacture, 
with the result that Hemlock is being driven from the field, — and this 
for the reason that the interests exploiting Yellow Pine territory are 
more powerful financially than are the people interested in the manu- 
facture of Yellow Pine. 

"It is indeed not difficult to reduce a public interest touching a 
situation of the kind indicated. It is not our purpose to urge that the 
situation as here outlined is due to motives of unfairness on the part of 
the Yellow Pine people. We realize that over-production and uncon- 
trolled competition are responsible ; but whatever may be the cause, the 
result to the Hemlock people is the same. 

"We, therefore, urge that if the Commission should conclude that 
under Section 6 that it has insufficient power to remedy the evils out- 
lined at this hearing, then we urge that the Commission investigate the 



144 FEDERAL TEADE COMMISSION HEARING 

unfair competitive conditions involved and advise with business interests 
that are so touched as to a remedy." 

You might add that as an appendix. 

The Chairman: You had better mark that Exhibit A. 

(The document referred to was marked "Worcester Exhibit A" 
and is attached to "Worcester Exhibit 1," and made a part hereof.) 

Mr. Worcester: Now, in closing this, I haven't much more to say, 
but I do want to say this in regard to natural resources : 

I said before that the lumberman was in a class by himself in 
so far as he relates to the various manufacturing concerns, the multi- 
plicity of manufacturing concerns that you gentlemen will come in 
contact with in the conduct of your affairs. 

But I want to say further that the timber resources of this country 
are in a class by themselves among the natural resources. 

The supplies of mineral are underneath the ground and indefinite 
as to their extent. New discoveries are constantly being made and 
added to the resources of the country. Up in the copper country there 
is more copper in sight today than there was twenty years ago, and 
in the iron country it is the same. It is so pretty nearly all over the 
United States wherever minerals are being mined, because there you 
will find there is more stuff in sight today than there was when they 
began. We do not know how much iron, copper, oil, coal, and so 
forth, there is or how much will be discovered in the future. All that 
we know is what has already ben found and proven to exist. Timber, 
however, as I say, is all above ground where it can be seen and counted, 
and we know within reasonable limits how much there is and how 
long it will last. We know there will never be any substantial addi- 
tions to the present supply, as it has been well demonstrated that 
annual growth is balanced by deterioration of over-ripe timber and 
reforestation is a process involving several generations. The pros- 
perity and existence of thousands of communities are dependent upon 
the extension of the life of our timber supplies. The lumber busi- 
ness, with its allied industries, is among the largest employers of 
labor in the United States, and any movement which tends to per- 
petuate the life and prosperity of this business also benefits the labor 
employed in the industry. 

I think that is all, and I thank you very much for your courtesy. 
Commissioner Hurley: I would like to make a comparison of 
what has happened in the case of the price of No. 4 and No. 5 white 
pine boards now, and before the tariff becomes effective. 



C. H. WORCESTER 145 

Mr. Downman: The paper that I presented yesterday is the gov- 
ernment report on the value of all species of lumber. You will find 
one exhibit there showing the white pine from 1906 to 1912 and the 
values of it, I think, as well as of the other species of wood. 

Commissioner Hurley: Thank you very much. That will give 
me what I wish. 

Mr. Worcester: I couldn't help you very much, 1 think, except 
by looking up the statistics, because we fellows up there haven't very 
much white pine left. We get a few thousand feet of it now and then, 
but there isn't very much of it left. 

Mr. Downman: Mr. Keith, did you want to ask Mr. Worcester 
any questions? 

Mr. Keith: No, I think Mr. Worcester has covered the matter so 
thoroughly that I do not believe there is a point that should be covered 
that he has not brought out. 

Mr. Downman: I thought you were going to plead guilty. 

Mr. Keith: I am perfectly willing to plead guilty. I think we 
pled guilty yesterday. 

The Chairman: What do you know about the extent to which 
substitutes have encroached upon your market, Mr. Worcester? 

Mr. Worcester: We find that cement has encroached to some 
extent on the market for good lumber, but, on the other hand, it has 
made a market for low-grade lumber in order to make the forms for 
the cement. You cannot use the cement without making a form to 
put it in, and that creates a demand for the lower grade lumber. At 
the Locks at the Soo Canal they are building now, they are going to 
build them of concrete and we are bidding on a large amount of 
lumber to go in to make those forms. The ore docks at Marquette, 
which are to be built all of cement, will have pretty near as much low- 
grade lumber in those concrete forms as they would have if they had 
built the dock of steel and timber. 

The Chairman: Have you felt the competition of substitutes in 
the hemlock industry? 

Mr. Worcester: We have felt it to an extent, but you can hardly 
put your finger on it. It is insidious ; it eats in a little bit here and 
a little bit there. But, in the face of our losing our business in great 
big wads to yellow pine, the competition of substitutes has not 
interested us very much so far. We have felt the competition of cedar 
shingles. Our shingle mills up North are shut up. We cannot get 
anything for our timber making cedar shingles today, because it goes 



146 FEDERAL TRADE COMMISSION HEARING 

away back up into British Columbia. British Columbia is shipping 
shingles into this country in competition with the West Coast, and 
both of them are shipping into this country in competition with us, 
and it has shut up our shingle mills. They are all of them selling 
below cost. In fact, in the shingle mills of the West, I understand — 
although this I get very largely from hearsay and lumber papers — a 
large number of the mills are being operated on a co-operative plan, 
and the men are taking about twenty per cent in cash and the rest 
in notes in order to keep some of those mills going. That is the 
condition of the industry. 

The Chairman: What is the underlying reason for this condition 
of the competition of yellow pine with hemlock here in this market? 
Why is it? What is the necessity for it? Have they had to dispose 
of it in order to dispose of their stock, or just why does that situa- 
tion obtain? 

Mr. Worcester: The yellow pine manufacturers are in a little 
different position from what we are in the North. We manufacture 
our lumber and it goes green from the tail of the mill into the lumber 
piles, which, when you were a younger man, you have seen up in the 
Wisconsin Valley. You know a lumberman up there can pile up 
his lumber for a couple of months, and if he don't get any orders for 
a couple of months he doesn't need to worry. But the yellow pine 
manufacturer has to clean up his stuff just as soon as it is sawed and 
brought over from the planing mill, and it must either go into a ware- 
house or into the cars. Now, a warehouse that will accommodate any 
great amount of dressed and worked lumber has got to be an enormous 
affair. 

The result is that the yellow pine people go crazy when there is, 
we will say, under-consumption or when there is over-production. 
They are all of them anxious for business ; there is no way to regulate 
them, and there is no regulating the movement ; there are no strings 
on anybody, anybody can do just as they please, and a great many of 
those concerns have bonds out; they are in debt, they have their 
interest and taxes to realize on, and they cut so much lumber every 
year and they just force it out into the market and keep going. 

The Chairman: That is what I wanted to bring out. 

Mr. Worcester: We are in the same situation, only we are not so 
bad off so far as our situation is concerned. We have more elasticity 
in our business. We can carry some stuff on hand and tide over a 
dull period. 



C. H. WORCESTER 147 

Mr. Keith: Mr. Chairman, may I bring ont just one point there 
in connection with your question? 

Speaking of the necessity of cutting timber to take care of bond 
issues, the investigation that we have made in detail in getting this 
cost of production has shown in some instances, and in quite a good 
many instances, for that matter, that after they had sold the Lumber 
and realized for their lumber, no excess over and above the cost of 
operation, exclusive of stumpage, the stumpage return itself was insuffi 
cient to meet bond requirements in some cases. And in some eases 
it was disclosed that as much as 80 cents a thousand had to be drawn 
on from the bank accounts, in order to make up the deficit after 
throwing the timber away. 

Now, one other question that I would like to suggest in connec- 
tion with your proposition as to the question of substitutes is this : 
I made a compilation in 1911-1912, and it is sworn testimony. It is 
an analysis of the situation of the per capita consumption of the 
United States. The figures are taken from the World Almanac and 
Encyclopedia, and from those of Overton W. Price, Assistant Forester. 
According to those figures it shows that between 1880 and 1900 there 
was an increase in population of 51.5 per cent ; between 1900 and 
1910 there was an increase of 21 per cent, and betwen 1880 and 1910 
an increase of 83.4 per cent. 

The per capita consumption in 1880 was 360 feet. 

In 1900 it had increased to 460 feet. In 1910 it had increased to 
532 feet per capita. 

There was an increase from 10,000,000 barrels to 80,000,000 barrels 
in the consumption of cement in the United States, the greatest sub- 
stitute which we have for lumber. 

Now, this thing works back and Ave are having a continuation of 
it. It is true that we have a continuation where substitutes in the 
form of cement and iron and steel are cutting in upon lumber con- 
sumption, but on the other hand, there is another situation develop- 
ing that overcomes that feature, and that is the increase in the 
population of the United States, and, consequently, while the per 
capita consumption may be decreasing, there is an increased amount 
by reason of the increase in population. Assuming the figures to 
run as they did in 1910, and assuming the figure to be 500 feel per 
capita instead of 532 feet, in order to make the figures easy of cal- 
culation, if we increased the increase at the same rate between 1909 



148 FEDERAL TRADE COMMISSION HEARING 

and 1919, that we did between 1900 and 1909, and the consumption 
per capita continued in the same period in the same way, we have 
then three-quarters of a billion feet per annum increase in consump- 
tion, which is accumulative, and on the ten-year period it is equivalent 
to 7,500,000,000 feet annually. That is, annually. 

Now, between 1880 and 1910, while there was an increase in popu- 
lation of 83.4 per cent, the actual increase in consumption of lumber 
was 172 feet. That was due to the fact that there was a 47.7 per cent 
increase in the per capita consumption during that same period, so 
that the point that I wanted to bring out so as to clarify your mind 
on the subject is this : I do not believe, taking the actual production 
of lumber since 1909, especially as far as the South is concerned, that 
there has been any increase in potential capacity to produce lumber. 
As a matter of fact, we believe that there has been an actual reduc- 
tion that has taken place, and in order to bring that point out, assum- 
ing that the railroad consumption is 50 per cent of normal at present, 
and that the railroad consumption was 30 per cent of our normal 
production of yellow pine products, it would be equivalent to a 15 
per cent reduction in consumption from that source. However, on 
the other hand, our percentage of reduction on our exports, as they 
were developed in the year prior to the war, represents a 50 per cent 
reduction there, which is an additional 6 per cent, or a total of 21 per 
cent. Assuming the building permits in the United States held up 
during that entire period, which they did not, we have a 21 per cent 
reduction in the consumption of lumber, which would make a con- 
sumption of 79 per cent of normal. 

Now, what actually did occur was that during that period, our 
actual consumption, as far as the yellow pine industry representing 
40 per cent of the business is concerned, was an actual consumption of 
over 90 per cent. That reasons out that our production has been on 
the decline. We are producing less lumber by reason of forest 
exhaustion. There has been no encouragement for the building of 
new mills except those who, because of contracts and bond issues, 
have had to build them. 

Consequently, if we take the increase in the period of 1900 to 
1910 in the population of the United States, taking into consideration 
the natural decline in production due to the exhaustion of our forests, 
it demonstrates that there has been practically no increase in the 
potential capacity to produce, and the effect of substitutes has there- 
fore been a very minor situation. 



C. H. WORCESTER 140 

The Chairman: That is all, I think, Mr. Worcester. We thank 
yon very much. 

Mr. Downman: Mr. Chairman, we will now proceed with the 

regular order. Mr. Hurley's question about the rise in white pine I 
would like to answer by reading the figures into the record. 

The Government figures show that from 1906 to 1912, there was 
only a range in price from $18.17 per thousand as a minimum to 
$19.41 as a maximum price during that period. 



A STATEMENT OF FACTS CONCERNING THE BUSINESS 

OF THE MANUFACTURERS OF HEMLOCK AND 

HARDWOOD LUMBER IN WISCONSIN 

AND NORTHERN MICHIGAN 

Presented by the Northern Hemlock and Hardwood Manufacturers 

Association Committee 

C. H. Worcester, Chairman 

H. W. Moore 

0. T. Swan, Secretary 

Summary 

The Committee in presenting this statement desire to say that we 
believe that the statements and statistics given herein are true and 
representative of this particular industry. 

It was not possible in our loosely woven Association to get data 
Prom all of the members, but we believe we have a fair average. We 
wo aid welcome an investigation of each individual firm and believe that 
such an expert investigation would substantially confirm what we have 
stated herein. 

The statistics collected and displayed on following pages may be 
summarized as follows : 

First. Over-production of lumber equal to 31% in 1914 and first 
5 months of 1915 equal to 22%. 

Second, Resulting great demoralization of prices and losses to 

manufacturers. 

Third. Losses to labor from reduction in wages paid. 

Fourth, Losses to the public and to manufacturers consequent 
upon inability to cut all the timber growing on lands without entail- 
ing increased losses. 



150 FEDERAL TRADE COMMISSION HEARING 

Fifth. The cost of carrying timber lands and difficulties in the 
way of voluntary curtailment. 

Sixth. Competition with Yellow Pine and other Southern woods. 
Seventh. Suggestion as to a "Cure" for the situation. 



Output 

The Northern Hemlock & Hardwood Manufacturers Association 
comprises 80 manufacturers of lumber in "Wisconsin and Northern 
Michigan. The lumber produced by these concerns covers sixteen dif- 
ferent species of woods. The principal woods manufactured being pro- 
portioned as follows : 

Hemlock 60% 

Maple 14% 

Birch 14% 

Basswood 6% 

Elm 4% 

Ash 1% 

Oak 1% 

During the year 1914 the members produced of hemlock and mixed 

hardwoods 823,513 M. ft. 

Inventories of this stock on hand January 1, 1914, totaled 350,085 M. ft. 

1,173,598 M. ft. 
Total shipments for 1914 were 626,999 M. ft. 

Inventories January 1, 1915 546,599 M. ft. 

Note that amount manufactured in 1914 was 196,514 M feet in excess 
of shipments, or 31%; also that Inventory of January 1, 1915, exceeds 
that of January 1, 1914, by 196,514 M feet, or 56%. 

If these plants had been operated to their full potential capacity 
during 1914 they would have produced 1,497,454 M feet and the surplus 
over shipments would have been 870,455 M feet, or 138%. 

For the first 5 months of 1915 the member plants produced 277,450 M. ft. 

Add January 1, 1915 inventories 546,599 M. ft. 

824,049 M. ft. 
The shipments during this period were 227,264 M. ft. 

Inventories June 1, 1915 596,785 M. ft. 

Note that production exceeded shipments by 50,186 M feet, or 22%. 
Also that Inventory June 1, 1915, exceeds Inventory of January 1, 
1915, by 9%. 



C. H. WORCESTER 151 

If the member plants had been operated to full capacity during 
this period the excess of lumber cut over shipments would have been 
460,426 M feet, or 202%. 

These figures show the accumulation of a large surplus stock of 
lumber in the hands of our members, in spite of the fact that during 
the first 5 months of 1915 26% less lumber was manufactured than 
during corresponding 5 months of 1914. 

Results of Over-production. This over-production and surplus 
stock in the hands of our manufacturers, coupled with the keen competi- 
tion of Southern lumber sold in Northern markets at below cost of 
Southern production has caused a complete demoralization of the 
market. 

A struggle exists today among the members of the Association to 
dispose of their product in competition with each other, in competition 
with manufacturers not members and in competition with Southern, 
Eastern and Western woods. 

The result is that the business of the members is being conducted 
at a loss, the natural forest resources of our section of this country are 
being sacrificed and wasted and it is only a question of a short time 
when the endurance of the strongest will make itself felt and the curse 
of over-production will be cured by the crushing out of the weaker 
firms. In support of this statement we append below a statement 
showing the average cost of the standing timber being now used by 
members, also the average cost of producing the different kinds of 
lumber ; 



152 



FEDERAL TRADE COMMISSION HEARING 



Present Cost of Stumpage Now Being Used by Members 

Hemlock. Maple. Birch. Basswood. Elm. Ash. 

Estimated average value of tim- 
ber Jan. 1, 1907 $2.50 $1.50 $4.00 $6.00 $5.00 $6.00 

Proportion of taxes, 1907 025 .014 .039 .059 .049 .059 

6% Interest on cost 15 .09 .24 .36 .30 .36 

1% Depreciation 025 .015 .04 .06 .05 .06 

Total cost Jan. 1, 1908 $2,700 $1,619 $4,319 $6,479 $5,399 $6,479 

1908 Taxes 025 .015 .041 .062 .052 .062 

6% Interest 162 .097 .259 .389 .334 .389 

1% Depreciation 027 .016 .043 .065 .054 .065 

Total cost Jan. 1, 1909 $2,914 $1,747 $4,662 $6,995 $5,839 $6,995 

1909 Taxes 028 .017 .047 .07 .059 .07 

6% Interest 175 .105 .28 .42 .35 .42 

1% Depreciation 029 .017 .047 .07 .058 .07 

Total cost Jan. 1, 1910 $3,146 $1,886 $5,036 $7,555 $6,306 $7,555 

1910 Taxes 029 .018 .049 .074 .062 .074 

6% Interest 189 .113 .302 .453 .378 .453 

1% Depreciation 031 .019 .05 .075 .063 .075 

Total cost Jan. 1, 1911. .. .$3,395 $2,036 $5,437 $8,157 $6,809 $8,157 

1911 Taxes 031 .019 .051 .077 .064 .077 

6% Interest 204 .122 .326 .489 .408 .489 

1% Depreciation 034 .02 .054 .082 .068 .082 

Total co- 1 Jan. 1, 1912 $3,664 $2,197 $5,868 $8,805 $7,349 $8,805 

1912 Taxes 042 .025 .067 .101 .084 .101 

6% Interest 22 .132 .352 .528 .441 .528 

1% Depreciation 037 .022 .059 .088 .073 .088 

Total cost Jan. 1, 1913 $3,963 $2,376 $6,346 $9,522 $7,947 $9,522 

1913 Taxes 054 .032 .086 .129 .108 .129 

6% Interest 238 .142 .381 .571 .477 .571 

1% Depreciation 04 .024 .063 .095 .079 .095 

Total cost Jan. 1, 1914 $4,295 $2,574 $6,876 $10,317 $8,611 $10,317 

1914 Taxes 054 .031 .085 .128 .107 .128 

6% Interest 258 .154 .412 .619 .517 .619 

1% Depreciation 043 .026 .069 .103 .086 .103 

Total cost stumpage, Jan. 

1, 1915 . .$4,650 $2,785 $7,442 $11,167 $9,321 $11,167 



C. H. WORCESTER 



153 



of Northern Hemlock & Hardwood Association 



Oak. 


Beech. 


Pine. 


Cedar. 


Tarn. 


Spruce. 


Balsam. 


Norway. 


Avge. 


$6.00 


$ 


.50 


$12.00 


$3.00 


$2.00 


$5.00 


$3.00 


$8.00 


$3.07 


.059 




.005 


.118 


.029 


.02 


.049 


.029 


.078 


.03 


.36 




.03 


.72 


.18 


,12 


.30 


.18 


.48 


.184 


.06 




.005 


.12 


.03 


.02 


.05 


.03 


.08 


.031 


$6,479 


$ 


.54 


$12,958 


$3,239 


$2.16 


$5,399 


$3,239 


$8,638 


$3,315 


.062 




.005 


.124 


.031 


.02 


.052 


.031 


.083 


.032 


.389 




.032 


.777 


.194 


.129 


.334 


.194 


.518 


.199 


.065 




.005 


.129 


.032 


.022 


.054 


.032 


.086 


.033 


$6,995 


$ 


.582 


$13,988 


$3,496 


$2,331 


$5,839 


$3,496 


$9,325 


$3,579 


.07 




.006 


.14 


.035 


.023 


.059 


.035 


.093 


.036 


.42 




.035 


.839 


.214 


.139 


.35 


.214 


.559 


.215 


.07 




.006 


.140 


.035 


.023 


.058 


.035 


.093 


.036 


$7,555 


$ 


.629 


$15,107 


$3,780 


$2,516 


$6,306 


$3,780 


$10,070 


$3,866 


.074 




.006 


.148 


.037 


.025 


.062 


.037 


.098 


.038 


.453 




.038 


.906 


.227 


.151 


.378 


.227 


.604 


.232 


.075 




.006 


.151 


.038 


.025 


.063 


.038 


.011 


.038 


$8,157 


$ 


.679 


$16,312 


$4,082 


$2,717 


$6,809 


$4,082 


$10,783 


$4,174 


.077 




.006 


.154 


.038 


.026 


.064 


.038 


.103 


.039 


.489 




.041 


.979 


.245 


.163 


.408 


.245 


.647 


.25 


.082 




.007 


.163 


.041 


.027 


.068 


.041 


.011 


.042 


$8,805 


$ 


.733 


$17.6.08 


$4,406 


$2,933 


$7,349 


$4,406 


$11,544 


$4,505 


.101 




.008 


.203 


.050 


.033 


.084 


.050 


.130 


.052 


.528 




.044 


1.056 


.264 


.176 


.441 


.264 


.692 


.27 


.088 




.007 


.176 


.044 


.029 
$3,171 


.073 


.044 


.011 


.045 


$9,522 


$ 


.792 


$19,043 


$4,764 


$7,947 


$4,764 


$12,377 


$4,872 


.129 




.010 


.259 


.064 


.043 


.108 


.064 


.172 


.066 


.571 




.048 


1.143 


.286 


.190 


.477 


.286 


.743 


.292 


.095 




.008 


.190 


.047 


.032 


.079 


.047 


.012 


.049 


$10,317 


$ 


.858 


$20,635 


$5,161 


$3,436 


$8,611 


$5,161 


$13,304 


$5,279 


.128 




.009 


.257 


.063 


.043 


.107 


.063 


.171 


.066 


.619 




.051 


1.238 


.31 


.206 


.517 


.31 


.798 


.317 


.103 




.009 


.206 


.051 


.034 


.086 


.051 


.013 


.053 



$11,167 $ .927 $22,336 $5,585 $3,719 $9,321 $5,585 $14,286 $5,715 

The above figures show plaiuly that the unsettled competitive conditions prevailing 
in the lumber business have caused a serious loss to several thousand owners of 
timber lands in Wisconsin and Northern Michigan, as the following figures will show 
that stumpage at above cost cannot be manufactured and sold without a large loss to 
the operator. 

See Appendix Page for further information as to collection of statistics on 

this subject, also reports published and not yet published of TJ. S. Forestry Bureau 
on Timber Values in Wisconsin and Michigan in 1907 and 1912. 



154 FEDERAL TRADE COMMISSION HEARING 

Operating Cost and Realization 

Compilation of the reports from member manufacturers, averaged, furnish the 
following average cost of production on hemlock and mixed hardwoods: 

Av.cost 
Logging — per M. ft. 

Includes all expense from stump to cars or banks, absorption of railroad 

spurs and depreciation of log equipment $ 7.81 

Log Freights — 

Actual freights paid 1.66 



$ 9.47 
Logs produced an average of 35% overrun, reducing the log cost per M. ft. 

lumber produced to 7.01 

Manufacturing Expense — 

Includes everything from cars or water to the pile in yard 3.11 

Shipping — 

Includes all expense of yarding and loading 1.074 

Sales Expense — 

Includes all expense of selling product 527 

Discounts and allowances 334 

Depreciation — 

Includes only reasonable depreciation and absorption of manufacturing 

plant and allied property 757 

General Expense — 

Includes taxes (exclusive of taxes on timber), insurance, salaries, etc ■ .989 



Lumber, average cost per M. ft., without any stumpage or without any in- 
terest on capital used in operation $13.80 

Average prices received on the average product Jan. 1 to June 1, 1915 15.32 



Margin left for stumpage and interest $ 1.52 

Average cost of stumpage $5.48, reduced by 35% overrun to 4.06 



Average loss $ 2.54 

In addition there is a further loss in interest on money used in manufacturing 
plant, stock on hand, book accounts, etc. 

Individual Operating Cost and Realization of Each of the Principal 

Woods Manufactured 

Hemlock. Birch. Basswood. Maple. Elm. Ash. Oak. Avge. 
Total stumpage 

cost Jan. 1,1915.$ 4.65 $ 7.442 $11,167 $2,785 $9,321 $11,167 $11,167 $5,485 

Logging 7.20 9.31 7.20 9.31 7.20 7.20 9.31 7.81 

Log freight 1.66 1.66 1.66 1.66 1.66 1.66 1.66 1.66 



Cost of logs at 

mill $13.51 $18,412 $20,027 $13,755 $18,181 $20,027 $22,137 $14,955 



C. H. "WORCESTER 155 

35% overrun re- 
duces lumber log 

cost to 10.00 13.638 14.834 10.188 13.467 14.834 16.392 11.077 

Manufacturing . . . 2.90 3.61 2.90 3.61 2.90 2.90 3.61 3.11 

Shipping 1.074 1.074 1.074 1.074 1.074 1.074 1.074 1.074 

Sales expense 527 .527 .527 .527 .527 .527 .527 .527 

Disct. & deductions .334 .334 .334 .334 .334 .334 .334 .334 

Depreciation 757 .757 .757 .757 .757 .757 .757 .757 

General expense.. .989 .989 .989 .989 .989 .989 .989 .989 

$16,581 $20,929 $21,415 $17,479 $20,048 $21,415 $23,683 $17,868 

Av. prices realized 
Jan. 1, 1915, to 
June 1, 1915... 13.17 19.15 21.30 15.55 20.13 22.53 25.43 15.32 

Loss . $ 3.411 $ 1.779 $ .115 $ 1.929 $ 2.548 

Profit $ .082 $ 1.115 $ 1.747 

The foregoing statement of cost and realization confirms the state- 
ment previously made that the business of the members is being con- 
ducted at a loss. It shows conclusively that based upon what were 
acknowledged to be fair stumpage values eight years ago the present 
average selling prices for lumber show a loss of from $3.41 to ll%c 
per thousand feet of lumber and an average loss of $2.54. We believe 
that these figures apply also to all manufacturers not members of our 
Association. 

Extended comment on this situation at this point is unnecessary, 
as the figures speak for themselves. 

Labor Shares in the Loss. When business is being conducted at a 
loss there follows an effort to readjust business methods to meet new 
conditions. An effort is made to reduce the cost of manufacture and 
the first step is to reduce labor cost by reduction of wages paid. We 
show below schedule of average wages paid in woods during years 1912 
to 1915 : 

Woods Work Wage Statistics 

Collected from members of Association and averaged. Board and lodging in 

addition to wages is included: [* 

January, January, January, January, 

1912. 1913." 1914. 1915. 

Bark peelers, per cord. . : $2.60 $2.55 $2.45 $2.35 

Kailroad engineers ■. 80.82 80.82 72.50 72.50 

Eailroad firemen , 44.00 44.00 39.00 39.80 

Eailroad conductors 45.67 45.67 45.67 45.67 

Eailroad brakemen 40.00 40.00 34.40 34.40 

Eailroad track foremen 44.17 44.17 44.17 39.00 

Eailroad laborers 30.92 32.08 30.50 22.00 

Hired teams, skidding 25.00 25.00 22.50 17.50 

Hired teams, hauling 31.50 30.67 29.00 22.83 

Hired team and teamster (2 horses) 50.00 50.00 , 50.00 45.00 



156 FEDERAL TRADE COMMISSION HEARING 

January, January, January, January. 

1912. ' 1913. 1^14. 1915.' 

Hired team and teamster (4 horses) 80.00 80.00 80.00 75.00 

Sawyers 32.71 33.39 . 32.46 24.87 

Log sealers 52.08 53.33 52.05 51.05 

Swampers 28.96 29.46 28.46 19.92 

Eoadmen ; 28.73 29.00 28.00 19.45 

Cant hook men 35.00 35.99 34.92 28.73 

Teamsters 34.04 34.00 33.65 28.81 

Jammer Crew — 

Tailing down 31.25 31.17 31.25 25.07 

Hookmen 32.55 32.91 32.55 26.82 

Top loaders 38.13 37.50 37.92 33.98 

Engineers 59.00 59.00 59.31 55.88 

Blacksmiths 58.41 58.41 60.23 56.82 

Barnmen . 32.58 32.58 32.58 28.83 

Cooks 69.32 70.57 69.85 67.62 

Cookees 31.38 31.69 31.85 27.15 

Choreboys 28.29 28.46 28.75 24.58 

Camp foremen 82.96 82.96 82.96 81.17 

During the year 1912 and the first half of 1913 conditions in the 
lumber business were fairly good. A surplus of lumber began to be 
felt in Fall of 1913 and during Winter of 1913 and 1914 prices de- 
clined, carrying with the decline a reduction in price paid for woods 
labor. This decline commences in above figures for 1914. As the lum- 
ber market further declined the wages paid also declined further as 
indicated in 1915 column. 

Reductions in wages at the manufacturing plants have also been 
made to the amount of 4.15%, but these have not been so marked as 
the reduction in common labor in the woods, which averages 13%. 

See schedules of wages paid in saw mills in 1912-1913-1914 and 
1915 in Appendix. 

The total paid out for labor in the production of 1,000 feet of 
mixed hard and soft wood lumber in Michigan and Wisconsin is very 
close to $9.00. During the Winter of 1914 and 1915 and during the 
first six months of 1915, reductions in wages have been made as high 
as 20% in woods labor. We believe that the total reduction in price 
paid labor of all kinds is close to 10%, or 90c per 1,000 feet. 

The amount of lumber cut and to be cut during 1915 in Wisconsin 
and Northern Michigan by Association members is estimated at 600,000 
M. feet. Therefore, it is evident that on account of the over-production 
and depreciation of price of lumber, labor will suffer a loss of about 
$540,000.00 during 1915 in this district in reduced wages, and as above 
estimated cut of 600,000 M. feet is 223,513 M. feet less than the cut of 
1914, there has been a further loss of labor of $9.00 per M. on 223,513 M. 



C. H. WORCESTER 157 

feet of lumber not manufactured this year, which amounts to $2,011,- 
617.00, making a total loss to labor in 1915 of $2,551,617.00 in opera- 
tions of Association members only. 

The operations of Association members include not more than 
60% of the total production in this territory; therefore it is reasonably 
safe to assume that the total loss to labor is close to $4,252,695.00 and 
we believe that curtailment of cut has been per force carried to a 
greater extent by smaller non-Association firms and that the loss to 
labor is really much greater. 

This labor statement shows plainly that unprofitable business con- 
ditions immediately re-act on labor earnings. 

Waste of Timber. The second move to reduce costs is to leave 
more timber in the woods to be burned up and lost to the public. 
Logging costs vary up and down according to the size and quality of 
timber cut. If only the largest and best is cut the logging cost is low. 
If the timber is cut close and all trees removed the logging cost is high. 
This difference in most cases amounts to $2.00 per M. At present 
prices of lumber, small and under average quality trees are left in the 
woods, as logging cost is too high to make it pay, and this applies 
equally to the process of manufacture in the mills. When prices are 
low and a large surplus production exists the manufacturers are forced 
to waste their timber. The amount of timber left in the woods varies 
greatly according to the quality and quantity per acre of the timber 
being cut. In some cases it is very large, but there is no data existing 
on which to base an accurate statement. Authorities in different parts 
of the States of Wisconsin and Michigan have been consulted and their 
statements averaged, showing under 1915 market conditions a loss of 
2,000 feet to the acre of timber wasted for lumber purposes through 
inability to manufacture it without a loss at present prices. This 
causes a serious loss to the community and to the lumberman, a loss 
which has been pointed out many times by economists and for which 
the lumberman has been roundly abused. The lumberman is anxious to 
remedy this condition and would do so if allowed to create a condi- 
tion which would enable him to cut all merchantable wood and still 
make a profit. 

Acreage Used Up Annually. The forested lands of Michigan and 
Wisconsin vary greatly in yield of timber, cutting from 5,000 feet to 
15,000 feet per acre. An estimate of 8,000 feet to the acre is consid- 
ered a high average for the district. With a total cut for Michigan 
and Wisconsin of 2,987,703 M. feet (1912 U. S. figures) it would require 



158 FEDERAL TRADE COMMISSION HEARING 

373,464 acres to furnish this timber. With a loss of 2,000 feet to the 
acre on account of inability to realize on it there is an economic loss 
annually in this district of 373,464 acres X 2,000 feet equals 746,928 M. 
feet; which computed at $4.00 per M equals $2,987,708.00. If this 
timber was all cut it would require 74,694 acres less to produce the 
total cut. Under present conditions we are destroying 25% more forest 
than is necessary to produce the amount of lumber required by the 
public. 

Pressure on the Lumbermen. Our conservationist friends in the 
various associations organized for that purpose in this country and 
the United States Forest Service point out that the lumbermen are at 
fault and are making their own troubles, manufacturing more lumber 
than the country needs and not only ruining one of the great businesses 
of the country, but also wasting important and necessary natural 
resources of the country by wasteful methods of cutting and artificially 
depressing the value of standing timber. 

To this indictment the lumbermen must plead guilty, but at the 
same time they also enter in justification the plea of self-defense. The 
fact is that the lumbermen of this country are being driven. They are 
not voluntarily running a reckless, thoughtless race. Most of them 
have no choice. It is a case of "Needs must when the devil drives" 
and in this case there are several devils, the most prominent among 
them being our old friends — interest and taxes — a team always on the 
job, working days, nights and Sundays, and driving the lumberman 
to do the same thing. Carrying charges on standing timber are in- 
creasing, due to the compounding of interest, the large increase in taxes, 
losses by fire and wind storms and increasing cost of care and surveil- 
lance. Happily, interest rates have not increased, but the total annual 
charges are such that large numbers of lumber manufacturers are forced 
by financial need to cut more lumber when the price is low than when 
it is high, as they must have certain sums of money each year with 
which to pay accrued debts and interest and taxes. When the price 
is low they must cut more lumber, as it requires more feet at the lower 
price to provide the funds. There are a large number of lumbermen 
in exactly this predicament and also a large number who are not in 
this condition. Those who are in debt feel that they have no choice; 
regardless of price, they must continue to run their mills to the limit 
of production. In times of depression these concerns, through necessity, 
demoralize prices by their eagerness borne of necessity, to sell. As be- 
fore stated, there are many lumbermen who are not heavily in debt 



C. H. WORCESTER 159 

and not forced to run their mills when prices are such that there is 
no profit, but here again the twin devils, interest and taxes, are driving 
days, nights and Sundays, and the interest money, which in most cases 
represents income upon which to live, is just as dear to the investor 
in stumpage as it is to the investor in farm mortgages or municipal 
bonds. The pressure is greatest on the man in debt, but it is there 
also with the man who is not in debt, but fears to lose the legitimate 
interest which is his due. 

Carrying of Stumpage for Long Periods Required. About all of 
this pressure on the lumberman to manufacture more lumber than the 
country wants arises from exceptional features which are the founda- 
tion of the business and which create a unique situation in the com- 
mercial world for the lumberman. I refer to the fact that most of the 
lumber manufacturers of this country are obliged to own and carry 
on hand the raw material with which to run their mills for ten to 
twenty years. Consider this a minute. How many manufacturing con- 
cerns outside of the saw milling business do you know of that have 
more than a few months' supply on hand of raw materials? There 
are a few minor industries, such as quarries, clay working concerns, 
cement works, etc., that have a stock of raw material sufficient to sup- 
port their operations for many years, but these supplies are of the 
cheapest character and represent very small investment of capital. 
Fifty-five per cent of the steel and iron industry of this country carry 
only a few months' supply of ore on hand, while only about 45 per 
cent carry any considerable reserves. But in this latter case the value 
of the ore in the ground is only about 5 per cent of the value of fin- 
ished pig iron, while the lumberman's raw material represents from 
15 per cent to 40 per cent of the value of the finished lumber. Prob- 
ably 90 per cent of the manufacturing concerns in this country carry 
only a few months' supply of raw materials on hand, the carrying 
charge on which is very small tax on their business. 

If by any chance the directors of a furniture factory found them- 
selves in the position of having ten years' supply of lumber on hand 
and heavily in debt for the purchase, what would they do ? They would 
probably go into the lumber business at once and get rid of it as quickly 
as possible by selling it on the open market. But if they found they 
could not do that at a profit, they would undoubtedly run their fac- 
tory night and day and make it up into something salable as fast 
as possible and get down to a few months' supply, expecting the saw 
mill man to carry the raw material and supply it to them as they are 



160 FEDERAL TRADE COMMISSION HEARING 

ready to cut it up and make it into furniture. The factories that use 
lumber, the railroads, the contractors, would regard a proposition to 
carry in stock a few years' supply of raw material as a ridiculously 
unbusinesslike proposition, involving the use of large amounts of capital, 
expense of interest, taxes, risk of fire losses and deterioration. Why 
carry such a stock when the lumbermen are there to do it for us? The 
lumberman has always done this and why should he not continue to do 
so indefinitely? The answer is that the lumberman has done this in 
the past because he could afford to and the holding of large stocks 
of timber was in the past a profitable part of his business, but during 
the past eight years conditions have changed and this is no longer true. 

Large groups of land acquired twenty to thirty years ago at $1.25 
to $5.00 an acre could be carried twenty years at compound interest 
and still show a good profit, but the lumberman who bought his stump- 
age at prices ruling in 1907 does not find himself in the same position. 
He paid $2.00 to $2.50 in 1907 for Hemlock and he finds that this 
stumpage today has cost him about $4.60 and if carried eight or nine 
years more will cost him close to $9.00. He also finds that the average 
cost of logging is greater and also the cost of his stumpage has doubled. 
He cannot sell his lumber for enough more in 1914 to equal the in- 
crease in the cost of the stumpage and the cost of logging and pro- 
ducing the lumber. 

Results of Over-production. "With the menace of constantly ad- 
vancing cost of raw material what does the average lumberman think? 
He thinks that he must cut this timber or it will eat his head off. 
He runs his mills night and day and doubles his cut. His neighbor 
does the same and the result is an overstocked market, intense com- 
petition for business, falling prices, no profit, temporary cessation of 
production. Then when the market begins to show a little strength, 
all go at it again, driven on by interest and taxes. This process has 
been in full swing for some time back and the question is, What will 
it do to the timber resources of the country? 

Conservationists employed by the Government preach the gospel 
of saving the timber for future generations, and the lumberman would 
hail with delight the means which would make it practicable to cut 
timber closer, utilize waste and conserve his raw material. The lumber- 
man knows how to do it if he is allowed to do it, but on the present 
cost of production and present lack of profit, no lumberman can adopt 
any conservation methods in the conduct of his business, as it would 
certainly increase the cost of production and cause a larger loss at the 



C. H. WORCESTER 161 

end of the year. The lumbermen know what ought to be done and 
would be glad to co-operate with the Government foresters to the end 
that their raw material might be conserved, but the same Government 
which advocates conservation also emploj^s trained lawyers whose busi- 
ness it is to prosecute all who by agreement among themselves attempt 
to manage their businesses so as to accomplish what the Government 
conservationists advocate. The lumberman is certainly being driven 
from the front and rear and there does not seem to be any place to 
sidestep. 

Here is a commodity necessary for the welfare of the country. 
The supply each year becomes less. The growth of new timber in most 
cases is a negligible quantity. The end is not far off; yet the owners 
of this timber cannot afford to conserve it under present conditions. 

Local Difficulties of Curtailment. The foregoing causes for non- 
curtailment of production are felt by lumbermen all over this country, 
but there are others which are peculiar to the location and character 
of the operation of lumbermen in Wisconsin and Northern Michigan. 
A large number of the manufacturers in that locality are dependent 
for their log supply upon Winter operations involving sleigh hauls, the 
driving of logs down streams and transportation by railroad long dis- 
tances to their mills, requiring the accumulation during the Winter of 
sufficient stock to supply their mills for a year ahead. Only a part of 
the mills in this section operate so as to cut timber the year around 
and continuously supply their mills. Winter operations involving the 
harvesting of a year's supply of logs must be planned and begun at 
least the year before and when started cannot be curtailed without se- 
vere loss. The crop once cut and on hand at the close of a Winter 's 
work must be cut into lumber and realized on regardless of market 
conditions, as a large part of the logs will be spoiled for good lumber 
if carried through the Summer months. Severe losses are often incurred 
by lumbermen who are obliged to plan the accumulation of stocks of 
raw material one or two years ahead of their needs during normal times 
only to find when their crop is harvested that the market is overstocked 
and prices too low to allow a margin of profit. Nevertheless the crop 
of logs cut must be sawn into lumber and sold. A lumberman cannot 
curtail production with a large stock of logs on hand that will "doze" 
or sink or perhaps burn up. He usually prefers a certain loss to facing 
a possible larger loss by carrying the logs over until next year. 

There is also much hardship and some suffering consequent upon 
the closing down of a saw mill. Such plants are usually located be- 



162 FEDERAL TRADE COMMISSION HEARING 

yond the settled country away from varied industries and the com- 
munity surrounding the mill is usually entirely dependent upon its 
operation for a livelihood. Every lumberman who has a well organ- 
ized crew prefers to run at a loss as long as he can stand it rather 
than disrupt his business organization by shutting down his mill. An 
equitable universally distributed curtailment of less than 7% would 
be no hardship to any community. Another cogent reason for non-cur- 
tailment in this section of the country is the feeling the lumberman has 
that the cut of lumber in this part of the country is such a small factor 
as compared with the South, which is our most active competitor, that 
curtailment by the mills in Wisconsin and Michigan will have little 
or no effect in the face of the fact that the Yellow Pine mills of the 
South cut in one month more than our entire district does in a year. 

The Government report for 1912 fixes the production of yellow pine 
at 14,737,052 M. ft. 

We use the statistics for 1912, as this is the latest canvass. 
Figures for 1914 are undoubtedly higher. 

The total production of hemlock in Wisconsin and Michigan for 1912 
was 1,145,867 M. ft. 

Total Southern yellow pine and Wisconsin and Michigan hem- 
lock 15,882,919 M. ft. 

Hemlock percent of total . . . , 7.21% 

Yellow pine percent of total 92.79% 

If the Hemlock manufacturers of Wisconsin and Michigan reduced 
their cut 33%% or 381,955 M, this reduction would make a difference 
of only 2.4% in the total volume of Hemlock and Yellow Pine produced. 
Whereas it would only require a reduction of 2.6% in the production 
of Yellow Pine to equal the same effect as 33%% curtailment on the 
part of the Hemlock manufacturers of Wisconsin and Michigan. 

Computations of this kind can easily be carried further and the 
relative position of Hemlock as compared with other competitive woods 
such as Fir and Spruce detailed, but the above is sufficient to show 
what a small factor comparatively our Hemlock cut is and how little 
control it is possible for the manufacturers of Wisconsin and Michigan 
to exercise upon the problem of over-production. 

The members of our Association in Wisconsin and Northern Michi- 
gan manufactured in 1914 only 451,241 M feet of Hemlock. If we 
were able legally to control our members and cut no Hemlock at all, 
the decrease in total of Yellow Pine and Hemlock would be only 2.8%. 
The futility of curtailment by our manufacturers is illustrated by the 
fact that our members during the first 5 months of 1915 cut 24% less 



C. H. WORCESTER 163 

Hemlock than during the same period in 1914, with no appreciable 
result on the market. Radical curtailment on our part is unfair to us. 
We would be giving up our natural trade territory to Yellow Pine 
without changing conditions materially. A Hemlock log produces noth- 
ing but common lumber. A Yellow Pine log produces 30 % of high 
priced lumber and 70% of common lumber, the combination yielding 
a higher average return for the whole log than the product of a Hem- 
lock log which is all common lumber. The cost of logging Yellow Pine 
is 40% less than the cost of logging Hemlock. These features enable 
the Yellow Pine manufacturers to absorb excess freight and to sell their 
common lumber in Northern markets at below the average cost of pro- 
duction against the best of our Hemlock lumber at cost and take our 
business away from us as far North as a line drawn East and West 
through Milwaukee. If this competition against our Hemlock could be 
carried on at a profit by the Yellow Pine mills, then we might admit 
that it was legitimate, but the statistics of Yellow Pine industry show 
plainly that when prices of Yellow Pine are at a point above their cost 
of production we can hold our own with Hemlock, but when Yellow 
Pine is sold below the cost of production as it has been sold during 
the past 12 months we lose our business. We claim that this is unfair 
competition, against the sentiment of the present administration and 
against public policy. We have complained to the Southern manufac- 
turers about this unfair competition, but their answer is that they 
cannot control the practice as they are not allowed to create or maintain 
any regulating medium. It is each man for himself and the survival of 
the fittest. The greatest demoralization exists in the Yellow Pine busi- 
ness today and we believe that the products of these mills sold at below 
cost are responsible for creating a like condition throughout the coun- 
try in other districts, as modern transportation methods distribute this 
lumber all over this country and the product of the North, the West 
and the East must compete with an enormous volume of production 
from the South sold below cost. We emphasize that the lumber pro- 
duction of the North is keenly competitive with that of the South and 
that of the West is competitive with both the South and the North, and 
the Eastern production is also fighting both the North and the South. 
If these four districts were each allowed to regulate by curtailment 
of product their own districts there would still remain a keen com- 
petitive situation. Prices could not be raised, unduly in any district 
without causing an importation of lumber into that district. 

We have enlarged upon the difficulties involved in curtailment to 



164 FEDERAL TRADE COMMISSION HEARING 

explain why the lumbermen of our section do not individually at once 
take action to remedy the situation. All of the foregoing detailed diffi- 
culties in the way of curtailment which are both local to our district 
and those universal to all could be surmounted if we had the right to 
organize to do it. It does seem that the prominent lumberman who 
recently said that the lumbermen of this country needed a guardian 
spoke the truth. They do need a guardian to conserve their properties, 
but it must be a guardian with authority to act and compel obedience. 
It is estimated that a curtailment of 6% by all the manufacturers of this 
country would effect a cure, but this can only be accomplished fairly 
by concerted action. It is not fair or just to expect the manufacturers 
of one district to curtail 33%% while the mills of another district cur- 
tail only 2.4% or not at all. Curtailment to be effective and fair to 
all must be co-operative and only by co-operation can we avoid the 
stronger firms and corporations eventually forcing curtailment by driv- 
ing the weaker concerns out of the business. This process is in active 
operation this year. There have been many failures and there will 
be many more before the year 1915 is ended. We do not believe that 
the public is entitled to the temporary results of ruinous and unfair 
competition in any industry in this country. We believe that it is 
against public policy to allow any large widespread industry to continue 
the practice of ruinous and unfair competition such as is now wide- 
spread throughout this country in the lumber business. 

The Remedy. The remedy is easy and it is spelled Co-operation. 
Co-operation which in every line of human effort (except business in 
the U. S.) is hailed as the most effective agency for advancement. 
Permission by the Government of this country to apply effective regula- 
tions limiting the production of lumber to the normal needs of the 
country could be initiated quickly, subject to the guiding and correct- 
ing hand of the Government and a great industry would be quickly 
restored to its normal condition to become an important factor at once 
in the rejuvenating of business prosperity in this country. 

Natural Resources. In closing this statement we wish to say that 
the timber lands of this country are in a class by themselves among 
the natural resources which should be conserved. The supplies of min- 
erals are underneath the ground and indefinite as to their extent. New 
discoveries are constantly being made and added to the resources of 
the country. We do not know how much Iron, Copper, Oil, Coal, etc., 
there is or how much will be discovered in the future. All that we 
know is what has already been found and proven to exist. Whereas 



C. H. WORCESTER 165 

timber is all above ground where it can be seen and counted. We 
know within reasonable limits how much there is and how long it will 
last. We know that there will never be any substantial additions to 
the present supply, as it has been well demonstrated that annual growth 
is balanced by deterioration of over-ripe timber and re-forestation is a 
process involving several generations. The prosperity and existence of 
thousands of communities are dependent upon the extension of the life of 
our timber supplies. The lumber business with its allied industries is 
the largest employer of labor in the United States, and any movement 
which tends to perpetuate the life and prosperity of this business also 
benefits the labor employed in the industry. 

APPENDIX I 
Explanation of Process Used in Arriving at Stumpage Values 

The cost of stumpage presents many interesting factors and in 
the following we have endeavored to trace the cost of stumpage in 
Wisconsin and Northern Michigan, beginning with 1907. 

We frequently read and hear references to the growth of timber 
as an offset to the cost of carrying stumpage. In some sections of the 
country, in certain classes of timber, this annual growth may be reck- 
oned as of value during a period of twenty years, but in the territory 
which we have under consideration, the experience of the last twenty 
years indicates that this growth is more than offset by the deteriora- 
tion of timber which has reached its maturity and has started on the 
down grade. Certainly the growth of the younger timber w^ould be 
offset by the deterioration of timber which has reached its maturity. 
We have solicited the opinions of many lumbermen on this subject in 
Wisconsin and Northern Michigan and they are unanimous in the opin- 
ion that, taken as a whole, the forests of this section are deteriorating 
at a greater rate than the annual growth of the timber which has not 
yet reached its maturity. Therefore, as related to this territory, the 
item of annual growth may be considered as negligible. 

An item of cost, which is by no means negligible but which can- 
not be ascertained definitely, is the damage done to timber lands by fires 
which occur annually all over the country, burning over cut over areas, 
eating into the edges of virgin forests and causing in the aggregate 
a large amount of damage. We are all spending considerable sums of 
money yearly to protect our forests, but this does not suffice for com- 
plete protection and damage continues more or less annually. This loss 



166 FEDERAL TRADE COMMISSION HEARING 

by fire, coupled with the damage from wind storms and insects is large 
in the aggregate, but so indefinite in character that it can only be 
guessed at. 

Interest rates used in computing carrying charges vary from 5% 
to 6%, but most of the financing done by lumbermen in the form of 
bond issues consists of issues of 6% bonds, which are sold to bond 
dealers at from 92 to 95 cents on the dollar, with an additional charge 
for expenses of examining the property covered by the mortgage, which 
is about equal to a further discount in the selling price of 2 per cent. 
A large part of the bond issues which have been floated on timber prop- 
erties have netted the lumberman only 90 cents on the dollar. Most 
of them have run for ten years at 6% ; making the interest rate paid 
$6 a year on the $90 secured by the lumberman from the sale of his 
bonds, which is very close to 6%%. At 6%%, with the taxes added, 
the cost of timberland increases alarmingly fast. For the purpose of 
our computation 6% is certainly a conservative figure for use in this 
case. 

Basis for Computation. In order to arrive at a starting point for 
a computation, we have endeavored to ascertain the average value of the 
various kinds of timber growing in Wisconsin and Northern Michigan 
during the period 1907-8, and we have solicited the experiences of many 
lumbermen and timber owners in this section of the country and have 
selected many actual sales and purchases made during that period, which, 
together with the opinions given, form a basis for an average of price 
ruling at that time. Some of the figures used were very low, placing 
Hemlock at $1.00; others placed it as high as $3.50. The location of 
standing timber and the relative cost of getting the logs to the market 
enter so largely into the value of the standing timber that it is only 
by securing averages of this kind that dependable figures representing 
an average of the territory in question can be secured, and in making 
this computation we have endeavored to secure an average. 

As the variety of timber on our lands is large, consisting of about 
sixteen different kinds of saw logs and a list of other products in addi- 
tion, the task of distributing the taxes on 40 acres of timberland equit- 
ably upon each item presents some difficulties. To simplify the matter 
some, short cuts were necessary which did not affect to any extent the 
accuracy of these figures. We received detailed estimates on 37,425 
acres of timber land, covering practically all the forest counties in 
Wisconsin and Northern Michigan, with detail of all taxes on each 
description from 1907 to 1915. 



C. H. WORCESTER 167 

Eliminating from the calculation such items as Hemlock bark, 
cordwood, and making an allowance for ties, poles, etc., we computed 
the value of these lands, using the average stumpage prices ruling in 
1907-8 for the different kinds of saw timber, secured as previously 
described. The taxes on these lands were then subdivided proportion- 
ately for each year, giving us the yearly taxes on each kind of wood, 
and it should be noted that the taxes have increased 118 per cent in 
the last eight years. 

This process enabled us to make the table shown on page , 

commencing with an initial cost January 1, 1907, and bringing the cost 
down to January 1, 1915, of each kind of saw log timber which is of 
importance. 

This table illustrates forcibly how carrying charges on timber lands 
amount up annually and increase the cost of the raw material used 
by the lumberman, which it is necessary for him to control to insure the 
life of his manufacturing plant. 

There are three methods of equalizing this constantly increas- 
ing cost: 

The lumberman should each year receive an advance in the price 
of lumber at least sufficient to offset this increased cost of raw material. 

Or he must make a profit in each year sufficient to equal the cost 
of carrying the raw material in addition to the profit legitimate to the 
conduct of his business. 

Or he must make a profit in each year equal to the average yearly 
cost of carrying the timber over the entire period. 

One of these three methods is absolutely fundamental to the exist- 
ence of the average lumber manufacturing concern. 

This principle also applies with equal force to timber lands owned 
by those who do not manufacture lumber. Interest and taxes accumu- 
late on investments of this kind. Some one must carry this raw mate- 
rial and only the Government can avoid the constant accumulation of 
interest and taxes. 

In the case of Government holdings, the Forestry Department with 
no interest or taxes to pay are now feeling the necessity of selling a 
large amount of timber to meet the annual expenses of simply caring 
for the timber. 

Referring back to the three methods of providing for "carrying 
charges," we present a concrete example of how the First Method 
works out in practice in Wisconsin and Northern Michigan. 



168 FEDERAL TRADE COMMISSION HEARING 

Example 

Assuming that a group of men wish to go into the business of 
manufacturing lumber in Wisconsin and Northern Michigan, it would 
first be necessary for them to purchase a group of timber sufficiently 
large to justify the erection of a manufacturing plant, say 200,000 M. 
feet. Under present depressed conditions a group of this size might 
be bought for an average price of $3.00 per M. feet. This purchase 
would start the concern with an investment of $600,000. Assuming 
that they cut 20,000 M. feet per annum, the following calculation shows 
how the cost of the amount cut each year increases, making it necessary 
each year to secure progressively higher prices for their lumber to equal 
the increasing cost of their stumpage. 



Calculation 

Timber investment necessary to insure life of plant 10 years, at rate of 
20,000 M. feet per year— 200,000 M. feet cost, say $3.00 per M— In- 
vestment $600,000.00 

First Year — Annual Carrying Cost — 

6% Interest on $600,000.00 $36,000.00 

1%, Depreciation fund 6,000.00 

6V 2 c per M. taxes on 200,000 M. ft 13,000.00 55,000.00 

$655,000.00 
Amount cut first year, 20,000 M. ft. @ $3.27 65,400.00 

$589,600.00 

Second Year — Annual Carrying Cost — 

6%. Interest on $589,600.00 $35,376.00 

1% Depreciation fund 5,896.00 

7c per M. taxes on 180,000 M. ft 12,600.00 53,872.00 

$643,472.00 
Amount cut second year, 20,000 M. ft. @ $3.57 71,400.00 

$572,072.00 

Third Year — Annual Carrying Cost — 

6% Interest on $572,072.00 $34,324.32 

] % Depreciation fund ' 5,720.72 

71/2C per M. taxes 011 160,000 M. ft 12,000.00 52,045.04 

$624,117.04 
Amount cut third year, 20,000 M. ft. @ $3.90 78,000.00 

$546,117.04 



C. H. WORCESTER 169 

Fourth Year — Annual Carrying Cost — 

6% Interest on $546,117.04 $32,767.02 

1% Depreciation fund 5,461.17 

8c per M. taxes on 140,000 M. ft 11,200.00 49,428.19 



$595,545.23 

Amount cut fourth year, 20,000 M. ft. @ $4.25 S5,000.00 

$510,545.23 

Fifth Year — Annual Carrying Cost — 

6% Interest on $510,545.23 $30,632.71 

1% Depreciation fund 5,105.45 

8%c per M. taxes on 120,000 M. ft 10,200.00 45,938.16 



$556,483.39 
Amount cut fifth year, 20,000 M. ft. @ $4.64 92,800.00 



$463,683.39 

Sixth Year — Annual Carrying Cost — ■ 

6% Interest on $463,683.39 $27,821.00 

1%. Depreciation fund 4,636.83 

9c per M. taxes on 100,000 M. ft 9,000.00 41,457.83 



$505,141.22 
Amount cut sixth year, 20,000 M. ft. @ $5.05 101,000.00 



$404,141.22 



Seventh Year — Annual Carrying Cost — ■ 

6% Interest on $404,141.22 $24,248.47 

1% Depreciation fund 4,041.41 

9V 2 c per M. taxes on 80.000 M. ft 7,600.00 35,889.88 



$440,031.10 
Amount cut 7th year, 20,000 M. ft. @ $5.50 110,000.00 

$330,031.10 

Eighth Year — Annual Carrying Cost — 

6%, Interest on $330,031.10 $19,801.86 

1% Depreciation fund 3,300.31 

10c per M. taxes on 60,000 M. f t 6,000.00 29,102.17 

$359,133.27 
Amount cut eighth year, 20,000 M. ft. @$5.97 119,400.00 

$239,733.27 

Ninth Year — Annual Carrying Cost — 

6% Interest on $239,733.27 $14,383.99 

1%. Depreciation fund 2,397.33 

10y 2 c per M. taxes on 40,000 M. ft 4,200.00 20,981.32 

$260,714.59 
Amount cut ninth year, 20,000 M. ft. @ $6.51 130,200.00 

$130,514.59 



170 FEDERAL TRADE COMMISSION HEARING 

Tenth Year — Annual Carrying Cost — • 

6% Interest on $130,514.59 $ 7,830.87 

1%, Depreciation fund 1,305.14 

lie per M. taxes on 20,000 M. ft 2,200.00 11,336.01 

$141,850.60 
Amount cut tenth year, 20,000 M. ft. @ $7.09 141,800.00 

$50.60 

Note. — Method of calculation as to Interest and Depreciation fund is same as 
used in previous tables. 

Taxes are progressively increased at a less rate than experience of past eight 
years have shown in table, page — . 

Using this method their raw material would cost them the first year 
$3.27 and the tenth year $7.09, and in the end would realize only 6% 
on their investment. It is perhaps unnecessary to add that a further 
profit must be made to warrant the investment in plant, stock, ac- 
counts, etc. 

The Second Method which involves making a profit sufficient in 

each year to equal the entire cost of carrying the raw material, would 

start the enterprise off with a high stumpage charge as follows : 

i 

20,000 M. (a) $3.00 = $ 60,000.00 

6% Interest 36,000.00 

1% Depreciation 6,000.00 

Taxes, 6%c per M 13,000.00 



$.115,000.00 = $5.75 per M. 

If the business was able to get sufficient for their lumber to absorb 
a charge of $5.75 for stumpage and earn besides a profit on their in- 
vestment in plant, stock, accounts, etc., and were able to repeat this 
process for several years, they would find that their carrying charge 
would reduce each year and their profits increase. This would be an 
ideal condition, but it is a condition which very few lumbermen have 
been able to create during the past eight years. On the contrary, the 
Number One Method has perforce been used by the large majority 
of lumbermen and today they find themselves with a large accumulated 
stumpage account and a market for lumber which barely allows enough 
to equal the first cost of the stumpage, with nothing at all to represent 
the accumulated carrying charges. 

The Third Method which involves an average uniform charge each 
year to Lumber Account during the 10 years is preferred by some 
operators. An example of how it works out follows : 



C. H. WORCESTER 171 

Investment— 200,000 M. ft. @ 3.00 per M. = $600,000.00 

First Year — Annual Carrying Cost — 

6% Interest on $600,000.00 $86,000.00 

1% Depreciation fund 6',000.00 

6%c per M. taxes on 200,000 M. ft 13,'000.00 55,000.00 

$655,000.00 
Amount cut first year, 20,000 M. ft. @ $4.75 95,000.00 



$560,000.00 

Second Year — Annual Carrying Cost — 

6% Interest on $560,000.00 $33,600.00 

1% Depreciation fund 5,600.00 

7c per M. taxes on 180,000 M. f t 12,600.00 51,800.00 

$611,800.00 
Amount cut second year, 20,000 M. ft. @ $4.75 95,000.00 



$516,800.00 

Third Year — Annual Carrying Cost — 

6% Interest on $516,800.00 $31,008.00 

1%. Depreciation fund 5,168.00 

7y 2 c per. M. taxes on 160,000 M. ft 12,000.00 48,176.00 



$564,976.00 
Amount cut third year, 20,000 M. ft. @ $4.75 95,000.00 

$469,976.00 

Fourth Year — Annual Carrying Cost — 

6% Interest on $469,976.00 $28,198.56 

1% Depreciation fund 4,699.76 

8c per M. taxes on 140,000 M. ft 11,200.00 44,098.32 

$514,074.32 
Amount cut fourth year, 20,000 M. ft. @ $4.75 95,000.00 

$419,074.32 

Fifth Year — Annual Carrying Cost — 

6%. Interest on $419,074.32 $25,144.46 

1% Depreciation fund 4,190.74 

8%c per M. taxes on 120,000 M. ft 10,200.00 39,535.20 

$458,609.52 
Amount cut fifth year, 20,000 M. ft. @ $4.75 95,000.00 

$363,609.52 

Sixth Year — Annual Carrying Cost — 

6% Interest on $363,609.52 $21,816.57 

1% Depreciation fund ?'5??'?? „ , 

9c per M. taxes on 100,000 M. ft 9,000.00 34,452.66 

$398,062.18 
Amount cut sixth year, 20,000 M. ft. @ $4.75 95,000.00 

$303,602.18 



172 FEDERAL TRADE COMMISSION HEARING 

Seventh Year — Annual Carrying Cost — 

6% Interest on $303,062.18 $18,183.73 

1% Depreciation fund 3,030.62 

91/oc per M. taxes on 80,000 M. ft 7,600.00 ~ 28,814.35 

$331,876.53 
Amount cut seventh year, 20,000 M. ft. @ $4.75 . 95,000.00 



$236,876.53 

Eighth Year — Annual Carrying Cost — 

6% Interest on $236,876.53 $14,212.59 

1% Depreciation fund 2,368.76 

10c per M. taxes on 60,000 M. ft 6,000.00 22,581.35 



259,457.88 
Amount cut eighth year, 20,000 M. ft. @ $4.75 95,000.00 

$164,457.88 

Ninth Year — Annual Carrying Cost — 

6%. Interest on $164,457.88 $ 9,867.47 

1% Depreciation fund 1,644.58 

10y 2 c per M. taxes on 40,000 M. ft 4,200.00 15,712.05 

$180,169.93 
Amount cut ninth year, 20,000 ft. @ $4.75 95,000.00 

$ 85,169.93 

Tenth Year — Annual Carrying Cost — ■ 

6% Interest on $85,169.93 $ 5,110.19 

1% Depreciation fund 851.69 

lie per M. taxes on 20,000 M. ft 2,200.00 8,161.88 

$ 93,331.81 
Amount cut tenth year, 20,000 M. ft @ $4.75 95,000.00 

$ 1,668,19 

This method works out principal and carrying charges very closely, 
but in the end it returns to the investor only his principal and 6% 
interest. 

The tax cost used in foregoing computations may seem high, but 
our figures show that the cost in 1907 averaged 2-6/10c per M. and 
in 1914 was 6-6/10c per M. In this computation a less rate of increase 
has been used, starting with 6V2 per M. and ending with lie per M. 

Examination of these stumpage figures shows what a serious addi- 
tion to stumpage charges accumulates in any year when the cutting 
of timber is curtailed, creating a load which succeeding years must 
absorb. A curtailment of 10% per year would not be serious and 
most operators would agree to this if it were arranged so that operators 
were assured the rest would do the same. 



C. H. WORCESTER 173 

APPENDIX II 

Saw Mill Wage Statistics 

Collected from members of the Association and averaged. Men pay their own 
board. 

July, July, 

1912. 1913. 

Sawyer, band $ 5.35 $ 5.30 

Sawyer, rotary 5.00 4.67 

Sawyer, gang 2.69 2.69 

Setter, band, steam set * . . 2.54 2.58 

Setter, rotary, steam set 2.50 2.50 

Setter, band, hand set 2.60 2.63 

Setter, rotary, hand set 2.63 2.63 

Edgerman 2.64 2.69 

Eesaw runner, saw mill 2.30 2.46 

Eesaw runner, planing mill 1.93 1.96 

Trimmerman, levers 2.06 2.11 

Trimmerman, handler 2.02 2.05 

Trimmerman, helper 1.80 1.84 

Tail sawyer, band 1.97 2.03 

Tail sawyer, rotary 2.12 2.12 

Tail sawyer, gang 1.79 1.81 

Edging pickers 1.68 1.75 

Counter or scaler 2.14 2.16 

Grader on green lumber chain 2.33 2.40 

Lumber handlers on chain 1.79 1.83 

Teamster, hauling from mill. . , 1.78 1.83 

Teamsters, wood and rubbish 1.76 1.81 

Lumber pilers 2.05 2.15 

Watchmen 1.94 2.00 

Oilers 2.01 2.11 

Engineer 3.09 3.13 

Millwrights 3.16 3.26 

Firemen, mill 2.16 2.22 

Log lacker 1-78 1.81 

PoSdsman 1.99 2.02 

Pond helpers 1-85 1.87 

Car unioaders I- 86 i- 88 

Filer, band 6.50 6.50 

Filer, rotary ^ 3.56 3.56 

Filer, on contract for mill 11.63 H-^3 

Slasherman I- 88 no 

Lath and wood pickers 1-75 1.78 

Lath bolter L96 f.02 

Bolt puller 1-97 1.98 

Lath shover L83 I- 88 

Lath puller 2.17 2.22 

Lath tyer • j-J/J 1.78 

Dry yard lumber handler 1-74 1.^8 

Dry yard graders, hemlock 2.-0 1.-6 

Dry yard graders, hardwoods *-°U ^-»o 

Machine runner, planing mill 1-93 -J.OJL 

Lumber loaders behind machines 1.7/ 1.7» 

Planing mill foreman 3.29 6.61 

Common labor around plant 1«'2 i'it 

Carriage man *- v ' ' 



July, 


Julv, 


1914. 


1915. 


5 5.30 


$ 5.05 


4.83 


4.67 


2.88 


2.69 


2.59 


2.37 


2.50 


2.25 


2.66 


2.58 


2.75 


2.61 


2.70 


2.55 


2.48 


2.32 


1.96 


1.87 


2.16 


2.06 


2.11 


1.94 


1.85 


1.72 


2.02 


1.91 


2.12 


1.98 


1.84 


1.71 


1.75 


1.64 


2.17 


2.03 


2.43 


2.32 


1.82 


1.72 


1.83 


1.73 


1.82 


1.73 


2.14 


2.03 


1.98 


1.87 


2.08 


1.96 


3.12 


2.95 


3.24 


3.10 


2.26 


2.12 


1.83 


1.71 


2.02 


1.91 


1.87 


1.75 


1.87 


1.80 


6.79 


6.23 


3.56 


3.58 


11.55 


11.31 


1.94 


1.84 


1.78 


1.66 


2.04 


1.88 


2.00 


1.85 


1.91 


1.76 


2.33 


2.13 


1.81 


1.63 


1.77 


1.68 


2.19 


2.12 


2.90 


L'.M 


2.03 


1.89 


1.80 


1.71 


3.35 


3.24 


1.72 


1.63 


2.15 


2.04 



174 FEDERAL TRADE COMMISSION HEARING 

APPENDIX III 

U. S. Census Reports 
on 

Average mill values per M. feet applied to the percentages of Hemlock and 
Mixed Hardwood manufactured by the Association members. 

AVEEAGE PEICES 

P. Ct. 1906. 1907. 1908. 1909. 1910. 1911. 1912.*1913.*1914.*1915.* Avg. 
Hemlock . . 60% 15.31 15.53 13.65 13.95 13.85 13.59 13.68 16.54 14.97 13.17 14.42 

Birch 14%, 17.24 17.37 16.42 16.95 17.37 16.61 17.43 19.20 20.56 19.15 17.83 

Basswood .. 6% 18.66 20.03 20.50 19.50 20.94 19.20 19.26 24.14 25.48 21.30 20.91 

Maple 14% 15.53 16.84 16.30 15.77 16.16 15.49 15.56 18.00 17.24 15.55 16.24 

Elm 4% 18.08 18.45 18.40 17.52 18.67 17.13 16.87 24.64 22.42 20.13 19.23 

Ash 1% 24.35 25.01 25.51 24.44 22.47 21.21 20.27 24.19 15.28 22.53 22.53 

Oak 1% 21.74 21.23 21.23 20.50 18.76 19.14 19.63 25.43 20.96 

Average ...100% 16.07 16.50 15.21 15.26 15.42 14.88 15.05 17.86 16.85 15.32 15.84 

*Private reports. 

No U. S. Census reports for 1913, 1914 and 1915. 

STATEMENT BY R. B. GOODMAN, GOODMAN, WIS. 

(Filed with the Commission in connection with brief of the North- 
ern Hemlock and Hardwood Manufacturers' Association.) 

Gentlemen of the Federal Trade Commission : 

In studying the interesting subject of lumber cost accounting I 
have had occasion to meet many other manufacturers and examine their 
costs of manufacture, and the realizations obtained for their product, 
and I can confidently assert that the conditions of at least ten of the 
largest and presumably the most efficiently managed operations in Wis- 
consin and Upper Michigan are making no better showing than those 
disclosed by the statements of the Goodman Lumber Company. I 
am also in a position to state that numerous smaller companies are 
operating on a margin of loss at least double the amount per M. feet 
indicated by these statements. 

Some of these companies are continuing to operate beyond that 
point that determines operation to be financially a less evil than ceas- 
ing to operate — i. e., the point where the loss from operation consumes 
all of the carrying charges and fixed overhead charges. But these 
mills are forced to continue producing lumber because they are not 
financially ingenious enough to command the necessary credit for carry- 



B. B. GOODMAN 175 

ing them over a period of idleness, and because they are living in such 
close familiarity with their employees that the dictates of their heart 
compel them to maintain their payroll to the extent of a complete sacri- 
fice of all stumpage values. 

It is not that lumbermen are better than other men in other lines 
of work. Some of Miss Ida Tarbell's articles would indicate that where 
employers in any line of industry are brought in contact with their 
employees there develops immediately a genuine concern for their wel- 
fare, and we lumbermen are, for the most part, so situated in our little 
towns — away by ourselves — that employer and employee are thrown 
together as they are not thrown together in the larger centers. 

I will give you one little example. I am returning to the Village 
of Goodman tonight for Mrs. Goodman has a children's party tomorrow. 
Last year Mrs. Goodman and two of her village friends called on every 
family and invited the children between the ages of five and ten. The 
entertainment w T as simple — they played "Drop the Handkerchief," 
" Ring-around-a-rosy " and "London Bridge is Falling Down"; the 
refreshments were ice cream cones and cookies. There were one hundred 
and sixteen children — all well dressed, rosy-cheeked, happy children. 
I slipped around and took these photographs. You will enjoy looking 
at them. I am no philanthropist and do not pose as one but I love 
these children, and I am proud of the village they live in and the 
industry that dresses, feeds and educates them. The fathers of these 
children, who work in our mills and yards are trained for that work 
and if set adrift — what can they do ? Many of these people' who have 
pretty homes and happy children were destitute when they came to 
us. I do not want to turn them out because they are all my friends 
and Mrs. Goodman's friends. 

Our company is one of a thousand — there are thousands of towns 
like Goodman, in Michigan, Wisconsin, Louisiana, Texas, Idaho, Wash- 
ington — all over the great producing regions represented at this hearing. 

We feel keenly the waste of our forests in un-regulated and wasteful 
over-production. We feel more keenly still the danger of forced sus- 
pension on account of lack of reasonable regulation and what this forced 
suspension means to the three millions of men, women and children 
in these little pioneer mill towns. 

There is in much of the matter presented here, such a variance 
from what is in the public mind concerning our industry that you are, 
no doubt, surprised. The difference between the state of the industry 
here presented and the condition set forth in the report of the Bureau 



176 FEDERAL TRADE COMMISSION HEARING 

of Corporations on the Lumber Industry is extreme. Yet it can be 
explained. 

There are two periods in the history of the industry of the past 
thirty years. 

First. — The period of increasing values and gradually advancing 
price level, which terminated about 1907, which was rife in timber 
speculation; replete with big enterprises which developed a few big 
men and few large fortunes. A period of wonderful development in 
which all the other great industries equally shared. 

Second. — The period of fluctuations from a stationary or horizontal 
price level that has existed from 1907 to the present day, which means, 
with some exceptions, a stationary stumpage value and the necessity 
of the mill operator earning each year the taxes and carrying charges 
on his entire stock of standing timber. A period in which all of the 
tendencies lead to wasteful and ruinous over-production. 

These periods are illustrated graphically in the accompanying 
chart. 

The investigations of the Bureau of Corporations were made in 
good faith and disclosed the conditions of the industry prior to 1907, 
and if these conditions had continued in our industry since that date 
they would be deserving of drastic treatment, but although this Bureau 
could investigate the past it could not investigate the future or be 
condemned for not doing so. We ourselves have only now awakened 
to the fact that there has been a radical change in the conditions affect- 
ing the industry, and to us a most startling warning of danger — 
a most serious alarm lies in the fact that with the changed conditions 
so ably portrayed to you at this hearing of lumbermen, under the 
auspices of the National Lumber Manufacturers' Association, with 
such urgent need of legislative help, we lumbermen must still keep 
fighting the opprobrium of past decades; still pay the penalty for 
the old days of prosperity and expansion that our industry has by 
some fortuitous chance been singled out to be crucified for. 

To you gentlemen I appeal — to you when you have well con- 
sidered all that has been presented to you here, and all that you find 
as you continue your tour. When you are yourselves convinced, as we 
ourselves are now convinced of the iniquities we seem to be forced 
to perpetrate against ourselves ; against our fellow lumbermen ; against 
public interests and against the national welfare of the future. That 
you will do all that in your wisdom you feel empowered to do on behalf 
of our industry; that you will recommend to Congress and to the 



E. B. GOODMAN 



177 




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178 FEDERAL TRADE COMMISSION HEARING 

President the doing of those things you feel are reasonable and fair, 
and for the benefit of the public interest in relation to the lumber 
industry. 

Mr. Downman: It is the desire, gentlemen, of the lumbermen, 
that Judge L. C. Boyle make a few remarks on the application of the 
Anti-Trust law to the conditions in the yellow pine industry. 

STATEMENT OF L. C. BOYLE 

Mr. Boyle : Mr. Chairman and Gentlemen of this Commission : 
I do not propose at this time to undertake a discussion of the legal 
matters that would naturally pertain to your powers. This I refrain 
from doing for two reasons : first, I think it would be better for this 
Commission to assemble all this data and be thoroughly conversant 
with the economic and industrial problems involved, working out in its 
own mind as it goes forward, such thought as would be suggested, 
touching the application of this statute to the situation as you find it. 
I hope at the conclusion of your hearings on this subject to have the 
privilege and opportunity of discussing the whole subject in an assem- 
bled form with you, not only from the standpoint of a lawyer summing 
up the evidence, but from the standpoint of a lawyer seeking to apply 
legal principles as involved in this statute, to them. 

Therefore, I will not undertake at this time to make any extended 
remarks about this phase of the matter. I think also that there are 
two or three gentlemen to follow me with brief suggestions, and I feel 
that it would be proper for me to hasten my remarks to a conclusion. 

There are one or two matters, however, that I do want you gentle- 
men to carry with you as you go ahead with this investigation. We are 
ail the time thinking, of course, and naturally and properly thinking, 
of the great public, the consuming public, and by law and in every 
way we are seeking by legislative enactments to protect that public 
from selfishness, and from greed, and from overreaching tendencies 
on the part of men who sell things to the public, and that is right. 
That is proper. 

However, in considering that phase of this whole industrial prob- 
lem, I beg of you gentlemen to carry this thought in your minds, that 
in this great industry that is one of prime importance to the nation, 
there are practically seven hundred thousand wage earners, which at 
an average of five to a family comprehends in the neighborhood of 
3,500,000 people. They are of this great body of consumers that we 



L. C. BOYLE 179 

are thinking about all the time, and a condition in the industry of that 
great multitude which tends to crimp it, and pinch it, and hurt it, 
labor having to carry its proportionate burden, reacts upon all other 
branches of industry, and as a sequence, that great consuming public 
is injured as a result thereof. 

Now, that may be academic in a sense, but it is a matter that we 
must bear in mind as we go forward in this general thought. You 
must remember that there are 38,000,000 wage earners in the nation, 
and that this great industry comprehends a considerable factor in 
that branch of our life. 

Now, just one other thing. The recurrent suggestion comes from 
the Commission as to this problem of substitutes. Just what is in the 
mind of the Commission in reference to that matter I know not, but I 
beg of you to think of this in that connection also, and these are but 
a few suggestions that are thrown out as I hope to elaborate more 
extensively -later. Suppose that as a result of the inventive genius 
of mankind these substitutes should take the place of lumber here and 
there, and that as a result thereof lumber will be supplanted in this 
field and in that field? That phase of the matter does not cure, but 
on the contrary aggravates the already aggravated situation, for this 
reason : here we have an industry of 48,000 plants, and 17,000 in the 
yellow pine industry alone. Great concerns that are now going con- 
cerns; they cannot shut down; it is impossible to shut down those 
plants and thereby conserve the industry. You can conserve the 
forests by shutting them down, but the men who have their money 
invested would be ruined thereby. They cannot do it. The overhead 
charges of the upkeep of the closed plant makes it impossible to do 
that ; so you have a condition, not a theory, confronting you in this 
industry. 

Now, here are these great wide outspread plants eating up a 
one-crop product. As yellow pine produces forty-odd per cent of the 
entire output, due to its peculiar condition it has got to market its 
product when it is cut, and they are cutting in a limited competitive 
condition. There is no chance for this man to shut down and have 
this other man go forward and take his trade away from him, so, 
therefore, they must cut, and they cut the choice sirloin steak of the 
tree and leave the other part of it to rot and to be waste to civilization. 
That is lost, gentlemen, forever; and so when I heard one of 
these gentlemen say that we have our troubles, I thought that I saw a 
smile on the face of the Commission in this thought, that all of these 



180 FEDERAL TRADE COMMISSION HEARING 

men coming before you have their troubles, and that these men's trou- 
bles are no greater or different from anybody else's troubles. But 
they are, gentlemen. 

The shoe manufacturer, the packer, any other source of industrial 
activity that comes before you does not present the same thought or 
situation that these gentlemen do. Why ? Because this line of industry 
or that way be temporarily affected by war and by financial stress and 
afterwards recover its healthy condition; but this industry, afflicted 
and its resources wasted, never can have replacement. Therefore, you 
have a matter that not only touches these men but indeed touches the 
public at large in a very intimate way, and one of the thoughts I had 
in my mind in reference to this matter is this : that if in the final 
analysis you business men, seeking to aid the constructive life of this 
nation and help further the plain, great body of the people, if you 
should find, as we feel you must find, that there is grave need of help 
here, Government help, guidance and protection, if you feel that way 
when you come to the conclusion of your investigation and you should 
find no paragraph in this law of yours to relieve the situation, I think, 
gentlemen, that you ought to be at least in a position where you could 
go to the Congress of our country and say to it that here is a great 
natural resource that is being shamelessly wasted, due, not to the fault 
or policy of the men engaged in it, but due to competitive conditions 
over which they have no control. 

Now, that is a thing of service, and of great service, that you can 
do, if you cannot help these men now. 

There is a deep thing here, a big thing, and it is one, gentlemen, 
that you are to feel the responsibility of when you come to the final 
end of the route of the investigation, because generations yet to come 
are going to either be benefited or unrelieved by your acts. So that 
if you find these things to exist as these men tell you, there ought to 
be help. Their position and condition is distinct and challenges aid. 
In no other nation in the world would this thing be permitted, much 
less be unavoidable. 

Now, the thought may come and your investigation may show, for 
instance, that these men are suffering from overproduction due to the 
exploitation of the forests unduly. That they have no business and 
no right to go and bond great properties in view of the very thing 
that now confronts them, and you may find thai much of their difficulty 
is due to a lack of vision on their own part. Somebody might say, 
"If they made that bed, let them lie in it." 



L. C. BOYLE 181 

That would be all right, gentlemen, if you were dealing with a 
resource that did not belong to humanity, but this thing is not in 
that category. If error has been made, if mistakes have been made in 
the building of plants that should not have been built, that does not 
alter the thing; I now repeat, and use the language of a great man 
who has gone before, and that is, that we are confronted not by a 
theory, but by an actual condition. 

Just one word about a thought suggested by Mr. Worcester, and 
I make it simply that you may be carrying it in your mind. In the 
little brief that I filed and which I shall elaborate later, I sought to 
analyze Section 6 on the theory that by the process of interpretation 
we might arrive at some power in the hands of this Commission 
whereby these men could come to you, telling you their troubles, and 
you could authorize them to do something that would bring about 
relief. There is going to be and doubtless will be grave doubt as to 
ihe correctness of my conclusions. Of that later on, however ; not now, 
but later. 

However, this business man, this man Worcester, who comes here 
telling his story as a plain business man, visioned a thought that I 
think goes deeply into the heart of this whole controversy, a suggestion 
that did not appeal to me at first, but as I thought about it and still 
think about it, it appeals to me more and more, and that is this; that 
under this new, untried problem of unfair competitive conditions, you 
have the right to control and regulate, to abate, wherein you exercise 
quasi-judicial power. In that Section 5 there is the significant thing, 
that when you find unfair competitive conditions affect public welfare, 
then you of your own initiative go into and seek to correct that 
situation. 

Now it is the public that that section had in mind, that the legis- 
lators had in mind; not the motives back of the competitive unfair 
situation. As a lawyer on the bench, you business men know that the 
books that deal with unfair competition deal with an entirely different 
thought than I have here in my mind; but the unfair competitive 
situation in this lumber trade, due to conditions that are unavoidable, 
may be the solution of your power in this matter. 

Now you say, "What could you do?" I do not know that answer. 
gentlemen, but I know this, that your Commission was designed to 
help; not simply to investigate and to find out. but to actually help. 
All right. Now we will say that hemlock had come here in the first 
instance and told its story and said that these people were ruining 



182 FEDERAL TEADE COMMISSION HEARING 

them, and you would call yellow pine before you and say, "What 
about this, gentlemen?" and they would say, "Yes, it is true, but our 
hands our tied. We cannot help ourselves." You then have an unfair 
competition affecting the public, and both parties to the trade condi- 
tion wanting to be relieved. Yellow pine cannot help themselves, 
because I think the lawyer might say it is all right, but you could say 
to them as a lawyer in the presence of a distinguished lawyer on this 
bench here, "There is nothing in this law prohibiting these men from 
getting together and combining, if you please, and limiting their pro- 
duction to the needs and the necessities of their industry as long as 
that does not impinge upon the welfare of the trade and the public." 

There is no doubt about that, but they do not dare to take my 
advice, because another lawyer that is on the bench may not agree 
with me or with my theory, and therefore they are pinched between 
the upper and the nether millstones. They say they do not dare to 
relieve the situation by helping the hemlock people by limiting their 
production to the needs of the trade. 

Now I make this suggestion, and' I do not make it with any vanity 
of thought about it at all, and I want you gentlemen to understand 
that I come here very humbly about this matter, but suppose you say 
to these gentlemen: "Here is an unfair competitive condition. We 
feel we have the power to regulate a condition of that kind," and you 
make the suggestion to yellow pine as to how the matter could be 
relieved. Now, that is just a thought thrown out for us to think about 
later. 

To conclude now what I have to say here. These gentlemen have 
asked me to go forward with this investigation to the end. I want to 
be of real help to this Commission. This is not like a lawyer serving 
men to get an advantage. I want to help this court, because in 
helping it I help my clients. I am going to take this record as it 
develops from time to time after we get through with this Chicago 
hearing, and before you assemble at some other point, digest and 
abstract the record you have made here, putting under appropriate 
headings, conservation, cost of production, distribution and so on, and 
so forth, assembling the data that has been made up by this record, 
and then I will print it and put it in your hands, thus enabling you to 
more readily get on top of this mass of detail. 

In addition I will do that for the additional purpose that I want 
you gentlemen to ask us to bring you things. We want to give you 
information. This is the beginning of this inquiry. Later on things 



L. C. BOYLE 183 

will occur to you. You Avill want to know things and we want you 
to ask us, and we will bring the best we have. 

In addition to that I propose making as careful an examination 
as I can of this Canadian situation. Not loose talk, not hearsay state- 
ments, but actual copies of their statutes and their practice, so that 
you may know that when you talk to Congress if that is the route that 
you will have to go, that you can say, "Thus they do in Canada, thus 
they do in Australia, thus they do in Germany," and so on. In other 
words, I want to be of real service. I feel in this case, gentlemen, in 
a parting word now, as I said to Mr. Keith some weeks ago, that I 
wanted at this age in my life, — and I have been in the general practice 
many years — I wanted to get into some branch of activity where I 
could not only serve myself as a lawyer in a professional way of gain- 
ing a livelihood, but I wanted to serve the public in some way that 
would be helpful. And, gentlemen, here is the way that I am going 
to try to serve them, and that is to help you arrive at a just and a 
fair conclusion. 

Honesty and frankness you will meet with, gentlemen, in this 
whole proposition. The day has passed for men to put their sails to 
the wind to find out which way it is blowing. They are going to put all 
the cards on the table. 

I want to say as a suggestion, that you must not think that this 
number of men here is the total who are interested. These men repre- 
sent approximately two thousand plants. They represent in the neigh- 
bor hood of from 1,400 to 1,600 operators. They represent one-third 
of the cut of the forests of the nation, so you have before you in this 
meeting here a very representative body of men, and I can say some- 
thing for them that they cannot say for themselves; I have been in 
their conferences, I know their heart purposes, I know they are honest. 
I know they want to give you the best information they have, and I 
want to say something further for your gratification if I may, and 
that is that they are pleased and gratified at the spirit in which they 
have been met by this Commission. 

Now, gentlemen, as the matter will go forward, I am going to 
develop my part in this work as best I can, in reference to the decisions 
of courts and things of that kind, and I would be glad to hunt them 
out for you, if any thought of that kind should come up. I am not your 
attorney; I am these gentlemen's attorney, and I am going to serve 
them the best I can, but I think I can serve them best by being of as 
much aid to you as possible. 



184 FEDERAL TRADE COMMISSION HEARING 

The Chairman: Mr. Boyle referring to the investigation in Can- 
ada, we have the laws pretty well digested. 

Mr. Boyle: Yes. 

The Chairman: But any trade agreements or contracts or facts 
with reference to the methods of fixing prices, or production, which 
as you say are not hearsay — 

Mr. Boyle: Yes. 

The Chairman: Anything of that kind that you can gather would 
be very welcome. 

Mr. Boyle: Yes. I am going to get that and I am going to get 
you also an extended illumination of the thought Mr. Nelson gave us 
here, because I fear that we may come at the end of this investigation 
to a conclusion of this kind : We will help our manufacturers in this 
country to develop their foreign trade and let the domestic situation 
take care of itself. How much better would it be for the foreign situa- 
tion to be abandoned altogether, rather than to leave the domestic 
matter to its own mercies. 

Mr. Downman: Mr. Chairman, it was suggested this morning in 
the questions asked relative to what you desire to develop, as to this 
substitute proposition and its effect on the lumber industry. You have 
had various statements made to you in that connection. We have also 
requested Mr. J. J. Rockwell, of Chicago, to appear here and make a 
short statement to you in regard to his investigation. He has investi- 
gated the question quite thoroughly in the last few years and has 
accumulated a vast amount of data which he has in his office, and I 
believe that he can enlighten you a good deal on that situation in a 
very few minutes. 



STATEMENT OF J. J. ROCKWELL 

Mr. Rockwell : Mr. Chairman and Gentlemen : There is a very 
considerable fund of data — 

The Chairman: Mr. Rockwell, will you just give me your name 
and initials? 

Mr. Rockwell: J. J. Rockwell. 

The Chairman: Address? 

Mr. Rockwell: Pullman Building, Chicago. 

The Chairman: And your business? 

Mr. Rockwell: Advertising business. 



J. J. ROCKWELL 185 

There is a considerable fund of data on this subject, but it is 
data of a kind which you cannot codify. You cannot analyze and 
reduce to a column of figures the currents and channels of demands 
in an industry as big as the lumber industry, so that about all we can 
get are the statements of authorities and men who have studied the 
subject in its various lights with relation to the figures we have pro- 
duced to back up certain conclusions, and to show the situation a good 
deal as a sales manager might show it. 

You see, it is quite impossible to speak of the encroachment of the 
substitutes. Cement has been spoken of. We all know, according to 
the best figures we have available, that the general production of lum- 
ber in the past five years has decreased, and the production of cement 
has increased. On the other hand, a great many of the uses of cement 
have been for things which lumber never would have been used for 
anyhow. They would have used brick or natural stone, and they have 
simply used cement to product the artificial stone. 

Then again, taking another view of it, it would be quite impos- 
sible to tell whether a man who built a building of cement and steel 
reinforced concrete was allowing his purchases of cement and steel to 
encroach upon a possible purchase and use of lumber unless you get 
back to the start of the thought about building in that man's mind. 
It is a mental condition. It is a condition of public opinion. It is a 
thing that you cannot analyze and get down to figures, so as I say, all 
we can do it to give you the benefit of such high lights as we have 
had on it, with some specific data and instances on certain questions 
that I have heard come up here in this meeting. 

I would like to say further that I have had to get this up very 
hurriedly. I did not know until Mr. Downman asked me this morning, 
that I was to appear, and I have had very little opportunity to put this 
in shape or even to collect a great deal of the data that we have. 

I tried very hard to find a document from the Forest Service, 
which I have been unable to find as yet, but which begins with the 
statement that the lumber mills of this country will never again operate 
to their full capacity owing to the competition of so-called substitute 
materials such as cement, brick, stone, hollow tile, metal fabrics and so 
on. That document is in existence and is an official document of the 
Forest Service. 

Mr. Downman: Mr. Rockwell, will you get that document? 

Mr. Rockwell: Yes, sir; I can find it. 

Mr. Downman: And put it in the files? 



186 FEDERAL TRADE COMMISSION HEARING 

Mr. Rockwell: Yes, sir; I can find it. 

Department of Commerce, Burean of the Census Bulletin, issued 
May 12th, 1913, on the production of lumber lath and shingles, on 
page 3, I read this : 

"Marked increase in demand for lumber followed by a rapid rise in 
values is problematical, since wood is now being forced to compete with 
substitutes in many of its present uses. Over half of the lumber cut 
goes into buildings and rough construction, about one-tenth into boxes, a 
twentieth into car construction, and a fourth into other uses. Concrete, 
steel, fiber, and other materials are competing in all of these principal 
avenues of consumption and in many minor ones. Thus, in a general 
way, increase in the value of lumber is limited in its leading channels 
of use." 

In another document of the same type, issued December 30, 1913, 
covering the production of lumber, lath and shingles for 1912, the 
statement is again made, and I read: 

"The greater part of the lumber produced goes into buildings and 
rough construction, about one-tenth into packing boxes, crates and so 
forth, and much smaller proportions into car construction, furniture, 
vehicles, and a great variety of other uses." 

The previous extract said that over 50 per cent of the lumber 
produced went into buildings. 

"There is a strong tendency toward more permanent construction 
in building and toward the use of materials other than wood in many 
other industries, and the increasing competition of other materials has 
doubtless operated to restrict the demand for lumber and to retard the 
general rise in its price which might be expected to accompany the 
gradual exhaustion of the available timber supply." 

I am simply reading these citations as a means of laying the ground 
for the data which follows. 

I read from a bulletin of the Hardwood Manufacturers' Associa- 
tion of the United States, dated at Cincinnati, Ohio, May 24, 1912, 
Bulletin No. 146, an article entitled "Substitutes for Wood." 

"A recent issue of the Saturday Evening Post contains the follow- 
ing interview with the chief of the Office of Wood Utilization of the 
United States Forest Service at Chicago. The reference to advertising 
in the last paragraph is especially significant : 

' ' c One of the standing problems in the Office of Wood Utilization is 
that of substitution. It is the hidden rock that has crippled more than 
one lumbering enterprise and has at times threatened the safety of almost 



J. J. ROCKWELL 187 

the entire trade. And the principal peril of this rock of disaster is that 
it is always shifting its position. Consequently the Office of Wood Utili- 
zation is kept constantly busy recharting the trade situation so that lum- 
bermen and manufacturers in wood may steer clear of Substitute Rock. 

" 'Substitution of other materials for wood,' says Mr. Sackett, 
"has made startling and sensational advances, especially in the last five 
years. You can hardly turn to a large industry that does not show the 
inroads of a substitute for wood. Very likely the cry that our forests 
are going fast is in a measure responsible for this wholesale substitution. 
Looking at this matter from an entirely economic and practical view- 
point, without any special prejudice in favor of wood, I am as yet 
unable to decide whether the benefits of this wholesale substitution 
outweigh its bad features or not ; but this I do know : substitution is 
the skeleton in the closet of practically every lumberman and wood 
manufacturer in the country. It is the secret peril of the entire wood- 
using trade. 

" 'Only a few years ago, during the late panic, the whole talk of 
the lumber trade was pitched to this key : ' ' Just wait until the railroads 
begin to hand out orders again and then we'll come back into our own 
all right and make up for lost time." The railroads, however, did not 
come back into the market again for lumber — at least, not in the old 
sense of the term. The car shop that formerly used eighty million feet 
of wood came for only ten million at most.' " 

Of course I do not know where this data comes from, but it is 
apparently from an official source. 

' ' ' The substitute had entered its appearance. The old-style Pullman 
car contained twenty thousand feet of wood; the present type contains 
only four hundred feet. 

" 'Previous to the panic, it had been the policy of the railroads 
running west of Chicago to use timber in their bridges, as well as in their 
depots, station platforms and wherever it could be used. They were 
expected to come back into the market for these, but they did not 
Instead, they built concrete bridges, stations and culverts. In their 
platforms they used brick and cinders. The same change has been going 
on in the country districts. An old retail lumberman told me that he 
used always to sell the highway commissioners of his section timbers and 
lumber for the bridges and culverts of their territory ; but suddenly they 
changed the policy of construction to concrete, and in self-defense he 
was forced to buy two brickyards. 

" 'Small boats were formerly built entirely of wood; now they are 
very largely made of galvanized iron and steel. The same substitution 
is going on in agricultural implement manufacture. The makers are 
using metal in the place of wood wherever they can. The reason they 
give for this is that the kinds of wood they need are becoming very scarce 
and dear. Wagon manufacturers are also making iron wheels and 
gearing to an increasing extent. 



188 FEDERAL TRADE COMMISSION HEARING 

" 'Oddly enough, this problem of substitution is, to a very large 
extent, a question of advertising. How many wholesale lumbermen ad- 
vertise in the popular magazines and periodicals ? Not a single lumber- 
ing firm ! One lumber association in the South, however, was shrewd 
enough to attempt to increase the use of its products by means of adver- 
tising directly to the consumer. What was the result? Why, the 
experiment was an immediate success ; and it is hardly an exaggeration 
to say that the use of this particular wood was multiplied by the pub- 
licity it received. On the other hand, all the building substitutes are 
floated by liberal advertising campaigns. There is not a patent roofing, 
building paper, stucco or plaster that is not sold almost exclusively on an 
advertising basis. Undoubtedly the lumbering interests must go into 
the advertising field if they are to maintain a successful war against the 
encroachments of the building substitutes. Another way of meeting the 
assaults of the substitute is to find increased uses for each particular 
wood. Here is where the Office of Wood Utilization can be of greatest 
service and it is pushing its work as rapidly as possible.' " 

Bearing in mind the statements made in these official documents 
of the Forest Service that fifty per cent of the production of lumber 
has been used in building purposes, it is interesting to observe certain 
data with relation to what has been done in eliminating the use of wood 
in building. 

Within the past year there has been an ordinance proposed in the 
city of Chicago to bring within the so-called fire limits all of the area 
of the city which was outside of the then fire limits, totaling about 
forty square miles ; and that ordinance finally passed, bringing in addi- 
tional fire limits of about twenty square miles, under a compromise, in 
which district the building of frame buildings of any kind is 
prohibited. 

Now, it is manifest at once that you cannot take great areas of 
cities and shut out wood as a building material and not have the 
market for lumber injured. They are not going to stop building in 
those districts. They are going to use something, and as they are 
barred from the use of wood, they must use a substitute, it may be any 
substitute, but they will naturally use it. 

Now, in that idea that is back of the fire limits ordinance we find 
a great mass of data on this whole subject, on the ground that wood 
used in the construction of buildings is responsible for the so-called 
terrific fire hazard in buildings in this country. In that connection a 
great deal of stress has been laid by very eminent authorities on the 
presumed difference between what was called the per capita loss by 
fire in this country and in European cities. 



J. J. ROCKWELL 189 

I will file a booklet which covers that subject. I will not attempt 
to go into that except to present just one or two thoughts on it. The 
data is all taken from the reports of the National Fire Underwriters 
direct. It gives a comparison between twenty-five European cities and 
eighty-one cities in the United States, and it shows that whatever else 
may be the cause, the cause of our so-called excessive fire loss is not in 
the use of wood used in the construction of buildings. 

I have here a letter addressed to me on November 18, 1918, by 
L. H. Kunhardt, vice president and engineer of the Boston Manufac- 
turers' Mutual Fire Insurance Company of Boston, from which I quote : 

1 ' It is a fact that a well built, mill constructed building of the type 
known as 'slow-burning construction, 7 when provided with sprinklers 
and proper auxiliary devices, is a much better fire risk than any fire- 
proof, so called, construction in existence when there is anything com- 
bustible in connection with the contents." 

I just speak of these things because on that peg as an argument 
is laid the basis by which public opinion has been stayed throughout 
the country to eliminate the use of wood in building construction, and 
then it becomes perfectly manifest, and that is a matter of common 
knowledge to all of us, that that campaign has been in existence, that 
the manufacturer of the so-called substitute has argued on that basis, 
that he has cited those facts and has put the public mind in a condition 
where it will tend to eliminate the use of wood. 

Now, if the public mind is put in the condition of demanding some 
other material because of the fire risk, that is the best evidence in the 
world, without any codified figures or statements in detail as to the 
encroachment on wood. If the demand is made for some other material, 
some other material is going to be sold. 

On that point — I will not go through this, but I will simply touch 
on it — here is a document gotten out by Mr. F. J. Martin, Manager, 
Northwestern Mutual Fire Association and Associated Mutuals, Seattle. 
Washington, entitled "Wood Construction vs. Substitutes." Under 
the heading of "Wood in Its Proper Place," he says: 

"If wood occupied the place it is entitled to, both in the interests 
of economy and safety, our lumber mills would be running day and night 
to supply the demand, and our fire waste would be reduced. Wood is 
one of the oldest of building materials, yet it is a surprising fact that 
very few of our best architects know how to build a good wooden build- 
ing from the standpoint of safety from fire." 



190 FEDERAL TRADE COMMISSION HEARING 

On that point I will just present and mention briefly an article 
by Mr. Frank D. Chase President of the Chicago Chapter of the 
National Fire Protection Association, from which I will read two 
paragraphs : 

"Wood as a building material has been in a measure discredited, 
because of the increasing use of concrete, or other forms of fire resistive 
construction. 

"Proper wood construction is suitable, however, in many instances, 
and its use is further justified by reason of lower cost and adaptability." 

There is only one other point I am going to bring up in this, 
because I think I have given enough to show the extent to which this 
thing has gone and the extent to which there are data upon which to 
form conclusions regarding it. The point was brought out this morning 
and again this afternoon that there was no trouble in regard to the 
encroachment of cement used in building because the forms used in 
the building of a concrete building were of wood and that the amount 
of wood, as stated by one speaker this morning, according to estimates 
given to him by engineers, was that there was substantially as much 
lumber used in the construction of a cement building in the shape of 
forms as there would be if the building were an ordinary mill construc- 
tion building. I agree with that as to some buildings, but there are a 
number of buildings which are built without the use of wooden forms 
for concrete at all. I present from one issue of the Engineering Record 
certain advertisements advertising a steel reinforcing fabric which is 
used without centering; it does the centering itself. This is a very 
large and successful firm and it says that this builds floors, arches, 
silos, tanks, and so forth. 

Another advertisement of the Blaw Steel Construction Company, 
which is a collapsible steel centering for use in building manholes, 
tanks or grain bins, subways, tunnels and shafts, sidewalks, houses, 
warehouses, factories, sewers, aqueducts, columns, beams, girders, and 
so forth. 

Still another development, an advertisement headed "Factory," 
for July, the year is not given, but I think it was 1913, of the Unit 
Construction Company of St. Louis, Mo., and other places, advertising 
a method of building reinforced concrete buildings in units on the 
ground and the method of construction as shown by their book, of 
which I have not a copy, so that they simply design their members so 
that they could cast them a lot at a time and use a few forms on the 



J. B. WHITE 191 

ground and pull them out, and there was very little lumber used in 
that kind of construction. 

I have some other things here, but I think I have covered the 
subject sufficiently, and if there are any questions, I would be glad 
to answer them. 

Mr. Downman: Mr. Davies seemed to be particularly interested 
in getting further information. Do you think it would be of any value 
to the Commission for Mr. Rockwell to file in due form a short synop- 
sis of what his ideas are about the encroachment of these substitutes? 

Mr. Rockwell: With such new data as I may be able to collect 
in the meantime? 

Commissioner Hurley: We would be glad to have him do so. 

Mr. Downman: Mr. Chairman, the next gentleman on our pro- 
gram is Captain J. B. White of Kansas City, Missouri, who would 
like to give a brief statement of the interest of the public in the For- 
est Conservation. Captain White has been very prominent in the con- 
servation question, and I believe he can make a statement which would 
be of value to the Commission. 



STATEMENT OF CAPTAIN J. B. WHITE 

Captain White: Mr. Chairman and Gentlemen of the Commis- 
sion : I feel that at this late hour that you are tired, and I feel that 
the ground has been pretty well covered by Mr. Keith, whose state- 
ment is very practical, and I believe it is correct statistical informa- 
tion; and the ground has been also well covered by Mr. Worcester, 
who gave a very logical statement, and I believe a true one in every 
way. Of course, I stand in a peculiar position as a yellow pine lum- 
berman with the fact before me that because we tried to get up an 
agreement in 1904 to conserve the forests, we were very heavily fined 
in Missouri. And now if the hemlock men bring suit against us for 
invading their territory with low prices, we must lay the blame not 
to the lumbermen but to the misguided legislators of the State of Mis- 
souri, who felt it their duty to pass a law, and with the best of motives, 
passed a law that we ignored and felt safe under, and we were more 
afraid of the Sherman law, and we invited the government, we urged 
the government, I did personally because I was posing as a conser- 
vationist, to send down three men and see if we had violated the Sher- 
man law. And your Mr. Robertson, who is, I believe, your special 



192 FEDERAL TRADE COMMISSION HEARING 

investigator, had charge of those other two men, and he went down 
and spent several weeks in looking us over and went to our mills in 
Missouri and Louisiana and boxed up several hundred pounds of 
papers, and we told him to take the whole twenty-one years of our 
existence and go over it thoroughly, and he did so, and everything 
went to Washington and everything came back all right, and it was 
not checked out as O-K, but it was never checked in as criminal in 
any way, and I felt that we were likely to be useful by claiming 
that we were conservationists, and I said so to all the lumbermen. 
We lumbermen got together in many an enthusiastic meeting and 
raised $100,000 to endow the Yale Forest School and raised some more 
money to put in an apparatus for testing timbers, and again raised 
some more money to build a distillery to find out what by-products 
we could get out of wood, and that distillery is now in operation up 
at Madison. We went up, some of us, to Madison at the time that 
institution was installed or dedicated, and I had the honor of being 
one, along with Dr. Van Hise and Ex-Governor Hoard and some 
others in saying something on that occasion. 

We believed we were conservationists. The lumbermen got dis- 
couraged. They paid out a good deal of money for conservation. We 
invited the forest class of Yale and the forest class of the other insti- 
tutions. I know I had on two different years the entire forest gradu- 
ating class of Yale University and of the University of Nebraska and 
of the University of Missouri and other places, and we did everything 
we could to get in touch with the foresters of the United States. We 
believe we are in close touch with them now. 

I was in favor of this Commission and I am in favor of this Com- 
mission and I am going to cut my remarks brief by just filing with 
you what I said before the Congressional Committee with regard to 
this Commission and its organization. Mr. Keith and I were down 
there, and we both made some enthusiastic statements in regard to 
the help we believed we should get and would get if the President 
would appoint this Commission. 

I also want to file Bulletin No. 222, which has only been out three 
weeks, which has been published by the United States Government, 
issued or edited by the Chief Forester, Mr. Graves. It gives the latest 
statistics that show the errors in some of the reports as to the amount 
of lumber manufactured in different years. For instance, several 
thousand mills are left out one year and not put in again. In 1904 
they were all put in, and in 1909 they were all included, and in 1899 



J. B. WHITE 193 

they were all included, and so comparing ten years of the reports 
made by the census we can see where we are drifting, but they are 
incorrect as a mode of comparison without reading what Chief For- 
ester Graves says in regard to the different years, as to how the infor- 
mation was gathered and compiled. 

I personally took such an interest in conservation that I went to 
Europe, made two trips to study the situation over, and I believe 
that conservation as practiced in Europe, if practiced here in the 
United States, would cure all the ills. I do believe if there was some 
way for us to publicly get together and agree that we would conserve 
our forests and that we would hand them down as a legacy to our 
children and our children's children, as a patriotic duty, as something 
that concerns the public welfare more than anything else, because 
they are a natural resource. I do believe if we could get together 
in some way as they do get together in every other civilized country, 
this matter of conservation would cure all the ills that we are com- 
plaining of. I believe if the matter was turned over to this Commis- 
sion and they would confer with the Forest Department of the United 
States, I do not think we would ever have any more trouble. 

Forestry has got to be practiced by conservation, and conservation 
cannot exist unless we can have some plan for conserving our re- 
sources, unless we can agree upon some plan that is intelligent and will 
not be harmful to the people. The fact now is, it has been referred 
to as yellow pine being quite high priced as regards its upper grades. 
Clear yellow pine today is selling for $18 a thousand at the mill ; 
you can buy all you want for $18 a thousand, and the lower grades 
are left in the woods to rot. I was much interested in those pho- 
tographs that Mr. Keith presented to you gentlemen. I felt like in 
the language or, rather, paraphrasing the language of an advertise- 
ment for a hair-growing medicine when I looked at these pictures ; 
one picture might be said conservation will cure, the next picture 
conservation will cure, but turn over to the third picture and it is too 
late for conservation. 

So that as long as we have something to conserve, conservation 
will cure, but when it becomes too late, and the forests have gone, 
then it is too late for conservation. 

I think this, that we have to study, as the foresters of the Unite* 1 
States are studying, where it will pay to grow the trees. It will not 
pay to grow them in Illinois, because my friend here tells me that 
in his county of Woodford, Illinois, that none of the land sells for 



194 FEDERAL TRADE COMMISSION HEARING 

less than $300 an acre. "We cannot grow forests on that land. I know 
now, I did not know then, 35 years ago when I went to Missouri and 
built a saw mill, if I had stopped in Illinois and bought some of that 
cheap land I would have made a great deal more money out of it than 
I did in going to Missouri and Louisiana and buying timber lands. 
But we bought some timber lands for $1.25 an acre from the govern- 
ment, because everything was sold at the price of $1.25 an acre. We 
bought all we wanted. We thought that was a big price, consider- 
ing where it was located. But lands have gone up, and those lands 
that we bought for $1.25 an acre from the government are worth today 
$50 or $60 an acre, and the lands that I could have bought when I 
came through Illinois 35 years ago for $10 an acre are worth $300 an 
acre. So that the lumberman's profits and the farmer's profits have 
come in about the same way. It is by the increase of those resources; 
it is the unearned increment that the farmer has got in the price of 
his land; and it is the unearned increment that has made the profits 
of the lumberman. 

Take lumber in any one year and the actual cost of stumpage and 
then predicate your profits upon that, and you have not got ten per 
cent. There is not a lumberman that has made ten per cent profit 
on any one year if he figures his stumpage at what it was worth in 
that particular year. In 1893 we sold our lumber in Kansas City for 
$10 to $10.50 a thousand. There is not a lumberman in Kansas City 
that paid over $10.50 in 1893 for his lumber. That was a condition, 
and it has been said since I can remember, and I have been in the 
lumber business 45 years; it has been said by old lumbermen, "Three 
years up and seven years down." And that is about the way we have 
gone. Any good remedy like conservation and the permission for us 
to get together under some reasonable legal restraint; that rule, if 
rightly made, will effect a cure, and it will keep us in line under nor- 
mal conditions. But when we have abnormal conditions like a war 
we cannot expect nor we cannot hope to have any rule that will apply 
to those abnormal conditions. We have got to take our medicine, 
whether it is for us or against us in war times. I do not believe 
that when this war is over it will bring any great prosperity to the 
lumbermen. If the lumbermen are not careful it will ruin a great 
many of them. They may have two years of good prices and great 
demand, if the warring states in Europe have anything to buy lum- 
ber with when they are through. They may have a couple of years, 
but in the meantime, take the disposition of the lumberman; he goes 



W. B. GREELEY 195 

to work and runs night and day and builds some more mills, and 
bye and bye we have another condition, "Three years up and seven 
years down," and down we go. That is the history of the lumber 
business, and any old lumberman can tell you his experiences, and 
that is the way it has been going. 

Gentlemen, I do not want to take up any more of your time. It 
is late. I thank you for your kind attention, and I will add, how- 
ever, I think if I have not already done so, an address that I delivered 
on this subject a few weeks ago. 

(The papers above referred to were filed by Captain White.) 
Mr. Downman: Mr. Chairman, the lumbermen have about come 
to the end of their string at this time. But it has been mentioned 
through various of the papers or presentations here something about 
the Forestry Department and the timberlands held by the United 
States Government. We know that the Forestry Department has 
given a great deal of thought and study to it, Mr. Graves as well as 
all his assistants, and we would like to have Mr. W. B. Greeley, who is 
present representing the Forestry Department, make a short statement 
of the relation of the lumber market to the National Forests. 



STATEMENT OF MR. W. B. GREELEY 

Mr. Greeley: Mr. Chairman and gentlemen, I do not feel that 
the interests of the Federal government in the administration of the 
national forests are very materially involved in this investigation. 

On the Federal holdings, principally in the western states, the 
public has retained approximately 590,000,000,000 feet of timber. It 
has been the policy of the government in pursuance of the Acts of 
Congress concerning the administration of the National Forests to 
offer that stumpage for sale from time to time in limited quantities, 
and up to the present date our annual cut has reached approximately 
500,000,000 feet. It is very apparent, therefore, that the sales of 
national forest timber have as yet not become any important factor 
in the supply of lumber of the country. 

The bulk of the timber cut from the National Forests goes for 
the supply of various local industries and communities which logically 
look to these adjacent areas to furnish the timber products which 
they need. In addition to this local use, a number of sales have 
been made from time to time to larger companies which participate in 



196 FEDERAL TRADE COMMISSION HEARING 

the general lumber trade of the country, and to that extent the gov- 
ernment has frankly recognized that the timber from the national 
forests is competing in a degree in the lumber markets of the country 
with the timber which is under private ownership and being marketed 
by the private mills of the country. 

The extent to which the public timber should be sold under such 
conditions as those now existing is very properly a matter for careful 
consideration by the government, and it is being given careful study 
in connection with the general inquiry into the whole situation which 
the Forest Service now has in progress. 

The situation which has been presented here by lumbermen from 
various sections has been reflected in the demand for National Forest 
timber. The applications for the purchase of government stumpage 
have very materially fallen off within the last two or three years, 
and in many cases it has been necessary to grant extensions of time 
to contractors who had already purchased government stumpage. It 
has been our policy to do that and not to force operators to cut the 
timber which they had purchased, when to do so would force them 
to operate their plants at a material loss. We have been very glad to 
approve extensions of time and permit cutting to wait until market 
conditions are more favorable. 

The handling of the National Forests, therefore, has been affected 
only to the extent that our sales of timber which now amount to about 
500,000,000 feet a year have been reduced a greater or less amount, 
and the probability of additional sales for the time being had, of 
course, been materially lessened. 

The Federal government does not manufacture any timber of the 
national forests, and our interests are affected only as regards the 
demand for stumpage. 

Is there anything further, Mr. Chairman, you would like to have 
stated on that subject? 

Mr. Boyle: Might I ask this question, and that is, the government 
by reason of its position, you say, grants extensions of time to those 
who buy stumpage, in view of market conditions; is that right? 

Mr. Greeley: Yes. 

Mr. Boyle : Has it taken contracts off of the hands of individuals 
who have entered into contracts witli the government by reason of 
inability of private individuals to go forward with the contracts? 

Mr. Greeley: That has beep done in a few cases, Mr. Boyle. 



W. B. GREELEY 197 

Mr. Boyle: From your information and knowledge of the situ- 
ation, the private owner who has erected a mill or contracted to do 
so by raising funds by a bond issue would not be in the same advan- 
tageous position of getting extensions of time from the parties from 
whom he is borrowing money as would the government be in to grant 
similar extensions. Do I make my thought clear? 

Mr. Greeley: Yes. 

Mr. Boyle: Am I right in my conclusion that the private oper- 
ator who is operating on money that he borrows would not be in as 
advantageous a position as the man who is dealing with the govern- 
ment direct ? 

Mr. Greeley: The difference is just this, that in purchases of 
timber from the government no large investment in stumpage is re- 
quired. The stumpage is paid for in comparatively small installments, 
as it is cut, so that the investment necessary is limited to that in the 
operating plant, therefore the man who takes over the government 
contract ordinarily does not have the same burden of investment to 
carry that the man who is operating on private land has to carry, so 
that there is not the same necessity in meeting the carrying charges 
in that investment to force a government operator to continue cut- 
ting under conditions when the private operator might be compelled 
to continue cutting. 

Mr. Boyle: Has the Department furnished the Commission with 
the detailed statement of the extent of timber holdings of the govern- 
ment? 

Mr. Greeley: I do not know whether that information has been 
furnished, but it is compiled. 

Mr. Boyle: It is available? 

Mr. Greeley: Yes, it is compiled in such shape as to be directly 
available. 

Mr. Boyle: And that would be available for our investigation so 
we could give the information to the Commission? 

Mr. Greeley: Yes. 

Mr. Downman: I would like to ask this question. "Within the 
last year has there been any reduction on the part of your Depart- 
ment in the price that they fixed on timber? 

Mr. Greeley: No, sir. 

Mr. Downman: You still adhere — 

Mr. Greeley: It is not the policy of the Forest Service to reduce 
its stumpage price in periods of depression. "We base our stumpage 



198 FEDERAL TRADE COMMISSION HEARING 

prices on the average lumber market prevailing over a considerable 
period, so that there has been, broadly speaking, no reduction in our 
stumpage rates. 

Mr. Downman: Are there any questions the Commission would 
like to ask, or have Mr. Greeley ask any lumberman here that might 
throw some light on the situation? 

Commissioner Hurley: Mr. Greeley, do you wish to ask any 
questions ? 

Mr. Greeley: I think that the general situation has been suf- 
ficiently well covered so it is not necessary for me to ask any questions. 

Mr. Boyle: Just one thought, Mr. Greeley. You have been pres- 
ent during this hearing with the Commission. What we are trying 
to get at is the truth about this situation, as I think everybody is con- 
vinced. Now, you are an officer of the government assisting the gov- 
ernment in the administration of a great department. If there is any 
criticism that you could make upon the showing that these men have 
made here, I think it would be in the interests of the public as well as 
an aid for this Commission for you to do it, because we want criti- 
cisms and we want light. If these men are wrong, they are not en- 
titled to what they are asking for. If they are right, they are certainly 
entitled to it. If you can make a suggestion wherein you can show 
they are not stating the facts as they truly exist, I think the Commis- 
sion would be advantaged by getting that information. 

Mr. Greeley: All I wish to say in reference to that, Mr. Boyle, 
is that about a year ago the Forest Service began a rather compre- 
hensive study of the whole situation in regard to the holding of private 
stumpage and production of lumber and the distribution of lumber. 
We are still engaged upon that study, which we hope to complete in 
the course of the next five or six months, and all of the data which 
we obtain will, of course, be immediately made available for the Fed- 
eral Trade Commission. While that study is in progress I feel that it 
would be inopportune for me to make any suggestion. When our 
study is completed and the data have been assembled and carefully 
studied, then we may have some definite suggestions to offer both to 
the Federal Trade Commission and to the industry, but until our data 
is completed I feel it would be better for me to withhold anything 
of that character that otherwise might be made. 

Mr. Downman: Mr. Greeley, I would like to ask this, to get it 
in the record. Has it been the experience of your Department that the 



W. B. GREELEY 199 

lumbermen generally have willingly given your Department all the 
information that you sought? 

Mr. Greeley: Yes, sir, for the most part we are getting excel- 
lent eo-operation. 

Mr. Downman: I did not know. I have been away for some 
time and I did not know whether you were getting it generally or not. 

Mr. Greeley: Yes. 

Mr. Downman: It is the feeling of most of the lumbermen that 
the Department is entitled to all the information we could give, even 
in details of our private affairs. As Mr. Greeley says, when you 
get that data, the information which the Department is compiling,. 
I think that you will find that it will hew pretty close to the line 
of the evidence that has been brought out here at this hearing. 

Now, Mr. Chairman, with those remarks I wish to thank the Com- 
mission for their courtesy here and will add to what has already been 
said here, that if there is any information that the Commission desires 
to illuminate this question in any way in their investigation, the Na- 
tional Lumber Manufacturers' Association as well as the affiliated asso- 
ciations and the members thereof will be more than glad to furnish it, 
or, if necessary, appear before your body at any time on your request. 

Mr. Boyle: When is your first meeting next on this subject going 
to be held, Commissioner Hurley? 

Commissioner Parry: The date has not yet been fixed. It will 
probably be in Spokane, a brief meeting in Spokane about the 6th of 
August. Following that there will be a meeting with the West Coast 
Lumber Manufacturers' Association in one of the cities of the North- 
west, Seattle, Tacoma or Portland, to be fixed by the association. That 
will be during the week commencing August 10. We will probably 
meet with the Redwood men of California about the 21st, during that 
week, in San Francisco. 

Mr. Boyle: That will be a convenient time to go to the Fair, 
then. 

Commissioner Hurley: Have you any further statement to offer? 

Mr. Downman: No, we are through. 

(Whereupon, at 5 o'clock p. m., the hearing adjourned.) 



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